Should You Pay Income Protection Monthly Or Annually? What Is Best For You?
Getting income protection insurance policy can be a big step and most providers will let you pay your income protection premium in several ways. One of the crucial factors to decide the mode of premium payment is the availability of funds.
You can usually pay your premiums monthly or annually. For many people, paying insurance premiums can be daunting, so it is a relief for them to be able to pay annually and get it over with. This may seem better, but it is not always affordable.
If you have tight cashflow and/or low savings, then monthly payments can be a better option for you.
You might be thinking which is the best option? Well, it entirely depends on your situation. Here are some ways to choose the correct way to pay your income protection premium.
Annual Income Protection Payment
Paying your insurance premiums annually will always be the least expensive option. Most of the companies offer discounts for paying yearly because it costs more for the insurance provider, if the policyholder pays the premium monthly. Also, it can be more work for a provider because it can require premium processing 12 times in a policy year.
Not only you will save money on an annual premium, but also you will be sorted for the year. If your income fluctuates throughout the year, or you get an annual bonus or tax refund, then an annual premium can be extremely helpful for you.
Monthly Income Protection Payment
If you have problems paying a full year’s insurance in advance, monthly options can sometimes be a better option and most providers offer it now. Instead of paying the entire premium at once, it is divided by twelve, and that amount is due every month of the year.
This is also a convenient way to pay your premium, especially if the insurance provider accepts online payment. However, this can be a little expensive as companies can charge instalment fees, since it involves more work for them, if you pay monthly.
Though you have to pay extra, monthly payments can be beneficial for some people. It allows you to spread the cost out, if your budget doesn’t allow for lump sum annual payments.
Also, if you want to make changes to your policy like adding some additional benefits or removing them, this can be a great option.
Before deciding which option is best, you have to consider all the factors – your budget, income and expenses. Everyone is different and such things cannot be generalised.
Carefully watch where you stand financially to decide on annual or monthly payments. If you are equally comfortable paying premiums annually or monthly, then go for annual payments. It will almost always result in a lower premium, if you are getting the same coverage, why should you pay more?
You should also lookout for any discounts that the insurer is offering, in relation to particular payment methods. Many insurers offer discount if you make online payments or you always pay your premiums on time. This can also be a great way to save some money.