Selecting Premium payment modes

Posted by Admin on 2

After selecting insurance plan, most of the time people never care about mode of payment.

Many People choose quarterly mode because they find it flexible, while those who believe in one time settlement choose Yearly mode.

All the modes have their own PROS and CONS but I personally feel yearly mode is the best option, and if you have liquidity issues then Half-Yearly Mode works better.

Let us take it by example,

Mr. A with Age 30, decides to take Endowment with Profit plan of 25 year, for Sum Assured 10, 00,000.

Mode

Monthly

Quarterly

Half-Yly

Yearly

Premium

3,509.00

10,012.00

19,717.00

38,818.00

Yearly Total

42,108.00

40,048.00

39,436.00

38,818.00

Overall Total

1,052,700.00

1,001,200.00

985,900.00

970,450.00

Loss v/s Yrly

(82,250.00)

(30,750.00)

(15,450.00)

-

Gain on S.A

(52,700.00)

(1,200.00)

14,100.00

29,550.00


Looking at the above table which shows Premium rates for various modes, we can see two important things.

1) By opting yearly mode, we are saving an amount of 30,750 v/s Quarterly mode on total payment.
2) If we look by maturity point, Maturity benefit will have a Sum Assured component, in this case after paying total amount of Rs. 9,70,450 one gets full S.A of 10, 00,000, i.e. a clear benefit of 29,550 !

So next time you buy a policy, try considering yearly mode.

For those who wants’ to shift to Yearly mode contact your Insurance Advisor :-)

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2 comments:

Anonymous said...

you have not considered the interest which one will earn by retaining the large part of premium money for whole year, instead of paying whole premium amount in beginning of year.

Bhargav said...

you are absolutely right if we don't opt for yearly mode we can earn interest on the amount,
however my belief is by paying yearly premium you have a
1)guaranteed saving which is tax free and interest you earned on say FD is not tax free.
2)also you can invest the balance amount (say whatever you save by yearly mode) in high interest earning instruments.

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