Are you paying your life insurance premiums in monthly installments rather than annually? You may be shocked to find just how high the financing rate is.

The purpose of this calculator application is to reveal the true, effective cost, rate of paying insurance premiums other than annually. The cost can be very high and is often misunderstood, even by some insurance agents. Unfortunately, not knowing the true effective cost of paying insurance premiums by installments instead of yearly could also mean lost opportunities to conserve your money.

We need to keep in mind that insurance premiums are payable at the beginning of each period, not at the end of each period. Therefore, if the premiums are paid annually, the full annual amount is paid at the beginning of each policy year. Similarly, if the premiums are paid in monthly installments, the first monthly installment is paid at the beginning of the first month of the policy year, followed by the remaining 11 monthly installments at the beginning of each subsequent policy month.

For example, let's consider a scenario where the annual premium amount is $1,000 and the alternative, monthly installment, amount is $90. Under this scenario, the alternatives are to pay the $1,000 at the beginning of the policy year or to pay the first monthly installment of $90 at the beginning of the first policy month, followed by 11 additional payments of $90 each at the beginning of each subsequent policy month.

In other words, if you opt to pay by monthly installments, please keep in mind that you are not financing the full annual premium but only the amount of the annual premium minus the amount paid as the first month's premium. In other words, in the above scenario, you are not financing $1,000 but only $1000-$90=$910. Moreover, please also keep in mind that you are financing the $910 only for 11 months (Note that the 12^th monthly installment is paid at the beginning of the 12^th month, which is essentially the end of the 11^th month). We need to also keep in mind that the principal amount being financed does not remain static but declines as each monthly installment is paid.

The example given in the above scenario assumes a "factor" of 0.09 for "conversion" of annual premiums to monthly premiums - a factor that is quite commonly employed by various life insurance companies (some insurance companies use even higher factors). By running the example on iM$Mart, you will see that the true effective equivalent annual financing cost in the above example is a whopping 18.59%!

Regrettably, consumer protection legislation and rules don't always require disclosure of the true effective cost rate of paying life insurance premiums by installments rather than annually. Use this tool to find out what the real effective cost is and conserve your money.

As an added benefit, this application also includes a button that you may tap to access the most objective and most comprehensive consumer resource for comparison of life insurance costs - WinQuote. While on WinQuote, you may also tap on the button to search for consumer interest oriented life insurance advisors in your geographic area who are equipped with the most advanced life insurance market research software.

Enjoy and Save!