Which premium payment mode is the most expensive premium mode overall?

• A. Monthly
• B. Quarterly
• C. Semiannual
• D. Annual

Answer: (A)

Premium payment mode affects the total cost because of charges tied to handling the payments and the time value of money. Monthly payments involve 12 billing cycles in a year, and the insurer often adds a small processing or financing charge with each payment. Those added charges accumulate, making the total paid over the year higher than if you paid less frequently. Annual payments have no ongoing per-payment charges and require one lump sum, so they’re typically the least expensive. Therefore, paying monthly is the most expensive premium mode overall.