The premium payment mode that results in the highest overall cost would be

• A. Quarterly
• B. Semiannually
• C. Annually
• D. Monthly

Answer: (D)

Key idea: how often you pay just as much influences the total you’ll spend over the life of the policy. Paying premiums month by month tends to cost more overall because each installment often carries a small administrative charge and, more importantly, you’re effectively financing the policy. Those monthly payments add up, so you pay more in total than if you prepay less frequently.

Annual payments are typically the cheapest since you avoid per-payment processing fees and financing charges altogether. Quarterly and semiannual payments sit between monthly and annual, adding some charges but not as much as monthly.

So, the monthly mode ends up costing the most in total.