Premium Frequency & Annual Percentage Rate (APR) Information
Frequency
Policyowners can choose to pay their life insurance premiums annually, semi-annually, quarterly, or monthly. One way to analyze these payment options is to calculate the modal premium "Annual Percentage Rate (APR)" associated with each periodic payment option.
- Modal premiums are used for most North American term life insurance products and certain permanent life insurance policies, but are not used with universal or indexed universal life insurance products.
The modal premium APR calculates the additional charges for a modal payment to the interest on an installment loan. Because of the flexible premium feature of universal and indexed universal life insurance policies, the APR concept does not apply.
- The "loan" would equal the annual premium less the first periodic payment. It is important to understand that unlike an installment loan, the modal premiums are not a debt owed to the insurance company.
- The policyowner is under no obligation to continue paying the modal premium. Premium non-payment, however, will cause the policy to lapse and insurance coverage will no longer be available.
It may not be appropriate to charge an Annual Premium to your credit card or to take out a consumer loan to avoid payment of modal premiums. This could result in interest charges associated with the credit card or loan that you would not incur by paying for your insurance modally. You should carefully consider all available information to help determine the manner in which you choose to pay your insurance premiums.
APR Calculator
You can calculate the modal premium APR if you know your Annual Premium and Periodic Payment.
- Periodic Payment is the amount you pay (or paid) monthly, quarterly, or semi-annually and it can be determined from your billing statement, cancelled checks, bank statements, or insurance policy.
- The Annual Premium is specified in life insurance policies. If you do not have the figure for your Annual Premium or need assistance, please contact North American.
This calculation determines what the modal premium "APR" would be if the Periodic Payment were to repay a loan equal to the Annual Premium. However, no loan is actually involved in the payment of premiums on a monthly, quarterly or semi-annual basis.
Index Universal Life products are not an investment in the "market" or in the applicable index and are subject to all policy fees and charges normally associated with most universal life insurance.