Insurance policies can be either single premium or annual premium insurance plans. You should compare the policies from various perspectives such as cost, tax exemptions, and returns. Our analysis of these factors shows that insurance policies with annual premium payments make more sense for your financial planning.
Let’s look at the various features of both the types of policies:
Costs – Insurance policies have policy allocation charges, administration charges, mortality charges and fund management charges. These are similar in both types of policies. Annual Premium policies may have these costs as a higher percentage of the premium but the mortality charges for a long-term policy reduce every year as the risk reduces each year. Moreover the costs charged at the time of buying single premium policies are higher.
Returns – According to industry experts, returns on annual premium policies are normally higher than those on single premium policies.
On the whole, we think that opting for an annual premium payment policy is better for your financial planning.