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Annual Premium

What is an Annual Premium?

An annual premium is the amount an insured needs to pay over the course of a year in order to keep their insurance policy in place. The annual premium you need to pay for life insurance gets set by the insurance provider once they evaluate your risk factors.

Annual premiums vs. single premiums

Most insurance policies come with an annualized premium but, in some cases, you’ll also have the option to choose a single-premium policy. With single-premium life insurance, you pay the entire amount due for the policy in a lump sum upfront instead of making periodic payments over the life of your policy.

Because single-premium policies require a significant sum of money at one time, most consumers choose annual premiums.

Determining your annual premium

Life insurance providers set annual premiums for each individual to whom they issue a policy. In many cases, the process for getting the policy setup requires underwriting, which may mean you will need to undergo a medical exam.

Using the information they learn from that exam and/or other data points about your overall health and wellbeing, the life insurance company decides how much to charge for your policy. Generally, healthier, younger people pay less in annual premiums.

Paying your annual premium

Your annual premium gives you the total that you owe to the insurance provider for the year in order to prevent a policy lapse. But you don’t necessarily need to pay it once a year. Most insurance providers give people the option to break up their annual premiums into monthly, quarterly, or biannual payments.

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