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Anonymous

12 Apr 2021

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Insurance

Why is annual premium cheaper compared to monthly for insurance and endowment plan?

How come annually premium is cheaper compare to monthly for insurance and endowment plan?

Discussion (4)

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Tan Siak Lim

12 Apr 2021

CFP. Director, Financial Advisory Group at Financial Alliance

Premium are also calculated annually, for example, see your car insurance. If you pay monthly, it's considered an installment, and it's not interest free.

Chris

11 Apr 2021

Owner and Writer at Tortoisemoney.com

If you pay the premium annually (at the start of the coverage period), the insurance company will have more time to generate returns on your money. As such, they don't need 'as much' to generate their required return. However, if you only pay monthly, at the start of the period, they only have 1/12 of the money to work with to generate returns on. Hence, the higher premium amount helps them to compensate for lowered returns.

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