Paying annually vs monthly

Insurers offer several payment frequencies and price them differently. Annual payment is usually the cheapest in total, because the insurer receives the money up front and carries no cashflow cost. Monthly payment usually carries a loading, sometimes described as a frequency factor.

The difference on any single policy is modest. Over a policy held for twenty-five years, on premiums that rise with age, it stops being trivial — and it is the one saving that costs you nothing in cover.

It also matters for comparison. The two published New Zealand data sets we use quote on different bases: MoneyHub publishes annual premiums, Quashed publishes monthly. Multiplying one of Quashed’s monthly figures by twelve will not give you MoneyHub’s annual figure, and not only because the insurers and dates differ.

1. 1Ask your insurer for the annual premium and the monthly premium as separate figures, in writing.
2. 2Multiply the monthly figure by twelve and compare it with the annual figure. The difference is the frequency loading.
3. 3Express that difference as a percentage. That is your effective return for paying a year in advance.
4. 4Compare it against what the money would earn sitting in your account, and against whether you would actually have it available in twelve months.
5. 5If annual is affordable and the saving is real, take it. If paying a year up front would leave you short, monthly is the right answer and the loading is the price of the flexibility.

Other frequency questions worth asking

• Whether half-yearly or quarterly options exist, and how they are priced against annual and monthly.
• Whether the policy fee is charged once a year regardless of frequency, or apportioned.
• Whether the payment method changes anything — direct debit, credit card and invoice are sometimes treated differently.
• What happens if an annual payment fails: the grace period on an annual policy works differently from a missed monthly instalment.
• Whether switching frequency mid-year triggers a pro-rata adjustment.

These are the details that decide whether the cover does what you expected. Read them before you compare on price.

• Whether the annual figure you have been quoted includes a first-year discount that will not repeat.
• Whether the grace period for a missed payment differs by frequency.
• Whether an annual payment is refunded pro rata if you cancel mid-year.
• Whether indexation is applied on the policy anniversary regardless of payment frequency, which it usually is.
• Whether comparing two insurers’ quotes is being done on the same frequency basis.

Every New Zealand insurer writes what life insurance costs in nz to its own wording, and the words are where the money is. Two policies that look identical on price can pay very differently when it matters. Closing that gap is the entire job of an adviser.

• Frequency loadings differ between insurers and are not published, so the size of the saving is insurer-specific.
• An adviser will ask for both figures as a matter of course, which most people never do.
• Where a household holds several policies, aligning renewal dates and frequencies simplifies the budgeting and can reduce fees.
• An adviser can flag when the annual saving is too small to justify the lapse risk for a tight household budget.

There are three ways to buy life cover in New Zealand, and they are not equivalent. You can buy direct from one insurer, which means you see one product range and one underwriting appetite. You can buy through your bank, which usually means a single insurer’s product sold under the bank’s brand, often with narrower definitions. Or you can go through an adviser, who quotes several insurers at once and is required to put your interests first.

The premium you pay is the same either way. Insurers build adviser commission into their pricing whether or not an adviser is involved, so going direct does not get you a discount — it just removes the person whose job is to argue your corner at application and at claim time.

• An adviser can see which insurer is currently taking your health history on standard terms, and which one will load or exclude it.
• An adviser can structure cover across two insurers if that produces a better outcome than putting everything with one.
• An adviser handles the underwriting back-and-forth, and is the person who chases the claim when a family is least able to.
• An adviser has to document why the recommendation suits you, which is a written record you can hold them to.

We are a referral service, not an insurer. We do not quote premiums and we do not sell policies. What we do is put you in front of one licensed New Zealand adviser who can compare the market properly.

1. 1

   You tell us what you are looking at

   The form takes about a minute. Nobody asks for your medical history on a web form — that conversation happens with the adviser, properly, and only once you have decided to proceed.

2. 2

   An adviser calls you

   A licensed New Zealand adviser talks through your situation: who depends on you, what you owe, what you already have in place, and what you are actually worried about.

3. 3

   They compare the market

   The adviser quotes across the major insurers, checks which of them will take your health history on the best terms, and puts the options side by side in writing.

4. 4

   You decide, in your own time

   There is no obligation and no cost to you. If the answer is that you already have enough cover, a good adviser will tell you that.