Most people who pay monthly instalments for term life insurance,  term or permanent critical illness insurance  or long term care insurance don’t realize they are paying expensive financing charges of 8%+ for the “benefit” of paying monthly! 

This does not apply to permanent universal life insurance  but does apply to whole life insurance.

Consumers are accustomed to paying for their car insurance or home insurance on a monthly basis where the calculation is often a straightforward ‘annual premium divided by 12’.

The life insurance companies are making BIG money on these finance charges and the majority people I meet who are paying monthly premiums tell me they were never informed of the added fees by their incumbent advisors. I assume those advisors didn’t know about the finance fees or didn’t tell their clients about these fees because it’s much easier to get a ‘yes’ on the lower monthly premiums than the larger annual premium.

Here’s the good news: depending on the insurer, those finance charges can go away on the policy anniversary or at any time of year.  Contact your advisor, your insurance company or let us help you.

If you are paying monthly and have access to a cheap line of credit, consider making the annual payment and save your money.  You will likely receive an invoice from your insurer 60 days before the policy anniversary in order to send payment for the annual amount.  If your cash flow situation should change in the future you can always revert back to the monthly payment plan.

My advice: don’t wait at the mailbox or for a call from your advisor.  Look in your insurance file now and get clarity on your personal situation.