Introduction
Insurance is a plan that safeguards you from anticipated calamities that may arise in life. It can be for your health or for renewing your car. Else, it can be a general life insurance wherein you plan to distribute your proceeds to your immediate successor in the event of your death.
Likewise, you have a wide variety of insurance policies to choose from. Some of the commonly opted-for insurance schemes are:
- Life insurance policy
- Health insurance policy
- Medical policy
- Theft insurance policy
- Car insurance policy
- Accidental insurance policy and so on
You can choose a policy scheme that suits your independent needs or requirements.
In this parlance, let us comprehensively detail the topic titled ‘Do you pay insurance monthly or yearly?’
How does the insurance policy work- Meaning and conceptualization explained
To apply for an insurance policy, you may have to approach a service provider that deals with insurance policies. The service provider can be a privately owned organization. Or, it can be a Govt-owned insurance firm.
As a member, you must fill in your credentials and apply for a policy that suits you or your family. It can be a car insurance or a general life insurance policy you may want to sign up with.
Once you fill in the required forms, you may be asked to provide your ID and Address verification documents. You can produce your Passport as your ID proof. And, your DL suffices as a valid form of address proof.
Once the KYC(Know-Your-Customer) procedures are complied with, your policy gets activated and you are good to go. And, then starts your premium plan.
Do you pay insurance monthly or yearly- Conceptualization explained
Insurance premiums can be paid using four types of installments. These are monthly, quarterly, half-yearly, and annually. Let us have a run-down into the same:
- Monthly payment of premium
Under a monthly subscription plan, you pay an insurance premium for the policy you have opted for from the product issuing firm. And, the premium sums have to be remitted by you month on month. Making monthly installments is more convinient for the insurer wherein the premiums are manageable from your wallet’s point of view.
- Quarterly payment of premium
Under a quarterly subscription plan, members remit their insurance premiums to the service provider once every three months or so. The amount can be a significantly highr policy amount over a monthly premium.
- Half-yearly payment of premium
Under a half-yearly subscription plan, the members pay insurance premiums once every 6 months or so. The premium amount is calculated for 6 months and is charged as a payout plan for subscribers opting for a half-yearly plan.
- Annual payment of premium
Under an annual payment plan, the premium is paid once every 12 months. The amount can be a lumpsum as one single payout gets tendered for the insurance policy for the entire term comprising 12 months.
The option to pay monthly or annually for a health coverage or auto insurance depends on the affordability of the insurer or member who remit the payouts to the insurance company.
Some of the service providers offer a one-time discount when you plan to make an annual payment of the premium amount.
Suggested Reads: Reasons To Choose Monthly Health Insurance Policies Over Annual Ones
Insurance payments- Monthly Vs Yearly- Points of differences explained
The convinience of whether you pay your insurance premiums once every month or you want to tender a payment on a yearly basis depends on your financial stability and it is the independent choice of the members who remit sums to the insurance company.
Let us find out the core points of differences between monthly installements and annual payments of insurance premium:
1. Ease of payment
When it comes to the ease of payment, opting for a monthly subscription plan is always the better choice. This is because you can make a payment just for the month alone and by doing so you would not be burning a hole inside your pocket.
On the contrary, when you may have to remit the payment for the entire year, the lumpsum amount can be a huge sum indeed. For you as a monthly paycheck receiver, this kind of option may or may not be feasible from the budget point of view.
In a nutshell, whether you pay for your car insurance or medical insurance annually or monthly depends on your individual ease of making your insurance payments with a service provider.
2. Financial stability
When you opt for a comprehensive insurance plan say like a medical or a health-care insurance, making a monthly payout can keep you in a better financial stead indeed.
In case you have medical emergencies or contingencies, your comprehensive health care insurance would be in an active mode even though you pay smaller amounts in lieu of the policy amount.
This way, you would have better finances to take care of impending medical emergencies wherein your policy would cover hospital bills, pre and post- hospitalization expernses, home-based health care bills, day care procedures, so on and so forth.
On the other hand, when you make arrangements to pay your insurance premium on a yearly basis, the amount you may have to dispense to the service provider may otherwise be huge leaving you with little or no savings if you really contemplate a medical emergency situation like a sudden hospitalization or so.
3. Choosing a premium that offers a higher assured sum on the policy
When you go in for a monthly payout policy, then you can conviniently choose a premium amount for a higher sum assured policy. And you can do so without worrying about what will be the payout option on the comprehensive policy you plan to cover.
For instance, when you choose a ten year car insurance policy for US $ 18,000 and you opt for a monthly payout plan, then your monthly remittance for the plan turns out to be $180 as against $1800 on a yearly remittance plan. Making a payout of $180 is easier on your pocket and you get the entire sum assurance when the car meets an accident or so.
On the other hand, making a lumpsum payment of $1800 is not only difficult from your pocket, but to avail the assurance amount in case of a calamity or look into impending stuff post an accident or so, things might turn out to be a difficult thing for you to manage or balance your finances as such.
4. Beneficial to senior citizens
The monthly payout plan can be more beneficial to senior citizens who find it convenient to remit a smaller sum of money over a comprehensive health-care or a medical policy.
This is because senior citizens who are aged 60 years and above are more susceptible to minor injuries and falls allowing them to get admitted into hospitals or day care health centers.
Therefore, when you pay monthly towards a comprehensive health coverage policy, this can be of a better benefit helping you pay your premium with an insurance provider at an affordable note.
On the other hand, on a yearly payment scheme, the senior citizens may find it extremely difficult to dispense annual premium payments upfront. This is because they thrive on their pension plans and do not get employment opportunities as the working class age group does.
5. Tax rebates on the cards
You may have to appoint a tax advisor to know how much tax waivers can be get on monthly insurance plans over yearly insurance plans. This way, you can choose the better one out of the two.
The tax waiver on a monthly plan is more lucrative as the money goes out of your bank wallet on a month-on-month basis as compared to a yearly subscription plan wherein you make a lumpsum or endowment sum towards the entire year.
The Bottom Line
Insurance plans help you save money towards a major hospitlization, car accident or a theft occurance wherein you pay affordable premiums in lieu of a service related calamity that the assurance policy amount covers for you.
You can avail benefits of paying monthly or paying annually as one lumpsum amount. What is it going to be depends on one’s individual choice.
You must understand the pros and cons of making the payouts monthly vs annually before you make well-informed choices to pay the insurance premium on a long-term basis.
