What is a Mode of Premium?
A mode of premium is essentially a payment schedule for a specific insurance policy. When you buy coverage, you get to determine your mode of premium. The most common modes of premium are monthly and annually.
Choosing a mode of premium
You choose the mode of premium before you bind coverage for an insurance policy. This determines how often you’ll need to pay your premium or the money you owe the insurance company to keep your coverage in place.
Most policies come with an annual premium, or the amount the policy costs for the full year. But the mode of premium allows you to opt to pay that in the way that’s best for you. That could be:
Some life insurance policies also give insureds the option to choose a single premium. With a single-premium life insurance policy, you pay a large lump sum upfront to lock coverage in place, but you then don’t need to make any premium payments moving forward.
Generally, fewer premium payments will come with fewer costs for the insured. Opting for an annual mode of premium may help you avoid administrative fees that could come with a monthly or quarterly mode of premium.
Although monthly or quarterly premiums tend to cost more overall, many people choose them because they make integrating their insurance costs into their budget easier.
Mode of premium vs. mode of payment
Some insurance companies distinguish between a mode of premium (how often you pay the premium) and a mode of payment (how you pay it, like a credit card). Others, however, roll these into one batch called a mode of premium payment.
When you set your mode of premium as you sign your insurance policy, you will also likely need to indicate a mode of payment. Choosing an automatic payment (or autopay) option, like a credit card or a withdrawal from your bank account, may come with an insurance discount.
Changing your mode of premium
Most insurance companies allow insureds to adjust their mode of premium. If you’ve been making monthly premium payments and you want to switch to an annual mode of premium, for example, you may be able to do so.