Paying a premium monthly instead of annually usually adds an installment fee, so 12 monthly payments cost more than the annual premium. The fee and the effective surcharge are worth seeing.
The example
$1,200/yr, $5 installment fee.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | 1200/12 + 5 | $105 |
| 3 | ×12 total | → $1,260 |
The formula
The formula:
How it works
How it works:
- Split the annual premium into 12 and add the installment fee.
- Total of 12 payments = annual premium + 12 × fee — more than paying once.
- The extra cost = 12 × fee; the effective surcharge % = extra ÷ annual premium.
- Compare to paying annually to decide if the convenience is worth the fee.
Illustrative math only — not insurance, financial, or legal advice. Policy language, state regulation, and carrier rules govern actual claims, premiums, and coverage. Always read the policy and consult a licensed professional.
Try it: interactive demo
Annual premium and installment fee.
Variations
Total of 12 payments
Full year cost:
Extra cost of monthly
vs paying annually:
Effective surcharge %
Cost of convenience:
Pitfalls & errors
Add the fee. Monthly billing usually carries a per-installment charge.
Round to cents. Use ROUND(…, 2) on money.
Down payment. Some plans require a larger first payment — adjust if so.
Practice workbook
Frequently asked questions
How do I calculate a monthly insurance premium in Excel?
Why does monthly cost more than annual?
What's the effective surcharge?
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