Calling your life insurance, health insurance, or auto insurance agent and setting up your current payments to be billed on an annual basis instead of quarterly or monthly; can often result in a net savings to you of up to 9%.
This is the equivalent of investing money at 9% with no fees and no taxes on the gain!
How is this possible? Insurance companies have found that they keep customers with the greatest success via annual billing versus other methods. They also save in administrative costs that occur in the billing process.
Therefore they encourage consumers to pay premiums in advance by offering discounts that in this economy can be three times more attractive than leaving your money in a municipal bond account or a low interest money market account.
What are the best ways to pay premiums?
Examples In order of the lowest cost to the highest:
Single annual payment: Usually no fees of any type and therefore the least expensive.
Semi-annual payments: This is often a great compromise since the fees may be as little as 2% additional.
Monthly deductions from a checking account: or credit card: The fees are about 4% on the low end and up
to 9% in most cases.
Quarterly payments: Insurance companies have found that this method of billing leads to the worst results
in customer retention, requires billing, and therefore is the most expensive. I have seen life insurance companies charge as much as a 20% fee for quarterly payments.
What is the bottom line? If you are holding enough money in a low yield investment vehicle like an interest bearing checking account, money market account, or in this economy; it just doesn't make sense to leave it there to earn 3% interest and avoid a savings of up to 9% net.
It should be also noted that other high fee accounts like credit card charges as well as insurance payments should be paid in full whenever possible before investing money towards your retirement etc. The reason: It's simple math: most investment accounts cannot perform on a guaranteed basis at a level higher than card fees or insurance premium fees.
Discounts vary according to both the insurance companies and the product types. The above examples are
typical though of life insurance companies. It is recommended that you call your insurance agent to determine the exact discounts for your personal or commercial lines of insurance and act accordingly. This article is offered for informational and entertainment purposes only and not meant to be construed as tax, insurance, or investment advice.
Please feel free to comment and/or contact me for more information
Author : Randy Taylor
Randy Taylor Financial Services
(916) 601-5270
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