 # Annual Percentage Rate for Insurance Premiums

Changing how often you pay your premium could save you money (it may be a lot!). Almost always, you have a choice of whether to pay premiums monthly, quarterly, semi-annually, or annually. Insurance companies typically charge extra when you pay other than annually.

However, that’s not the whole story. The actual charge is higher, as is illustrated by the calculation and usage of an “Annual Percentage Rate (APR)” as defined under the “Federal Truth In Lending” law. This calculation illustrates a higher percentage rate than shown in the para graph above. This is due to the fact that the policy owner does not have usage of the entire annual premium for the entire year.

You can judge whether you are willing to pay the extra cost by calculating the annual percentage rate (APR). Unfortunately, insurance companies are not required to disclose the APR, so you have to calcu late it yourself. You can produce a good approximation with one of the formulas below. The first is for monthly premiums, the second is for quarterly, and the third is for semi-annual.

For example, if the monthly premium is \$95 and the annual premium is \$1,000, the first of the formulas would produce an annual percentage rate of about 29.7 percent, and it would clearly be in your interest to pay it annually.

Enter your premium options below to see how much you can save by paying annually and the APR for paying semi-annually, quarterly or monthly bank draft:

APR Calculator
Extra Charges
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Dollars
APR

The calculation is shown below; the factors are below the formulas.

3,600((12*\$95)-\$1,000) 3,600(\$1,140-\$1,000) 3,600 (\$140)
APR= ——————— = ——————- = ———– = 29.7%
(13*\$1,000)+(42*\$95) \$13,000+\$3,990 \$16,990

Formulas for calculation of APR:

Where: 