If an insured reduces the number of payments on their insurance policy, what happens to the annual premium?

When an insured reduces the number of payments on their insurance policy, such as switching from monthly payments to an annual payment plan, the overall annual premium typically decreases. This reduction in premium is often due to the concept of discounting. Insurance companies often offer lower premiums for policyholders who pay their premiums in a lump sum or annually rather than in installments. This is because processing payments more frequently incurs administrative costs for the insurer.

Additionally, paying annually reduces the risk of lapses in coverage that may occur if premium payments are missed or delayed. This encourages insurers to provide a more favorable premium structure for those who choose to pay less frequently. Therefore, it is accurate to say that reducing the number of payments typically results in a lower annual premium.