Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which statement about premium payment modes is correct?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The fewer the installments, the lower the total annual cost: the annual mode is usually the least expensive because the insurer bills once and has the full premium at the start of the policy year, avoiding the administrative expense of frequent billing. More frequent modes — semi-annual, quarterly, and especially monthly — carry modal (installment) charges that raise the total cost of the same coverage. The difference is a service charge, not a discount on the risk itself.
Why the other options are wrong
- B) More frequent payments cost more, not less; the interest the insurer may earn does not offset the added billing and service charges.
- C) Costs do differ by mode because insurers add installment charges to cover the extra administrative work.
- D) Monthly payments, not semi-annual, carry the highest installment charges of the standard modes.
Memory hook
Fewer installments = lower total premium. Monthly billing is convenience priced in.