The short answer
A modal premium is what you pay each time when you pay more often than once a year. Banner Life's consumer spec sheet lists its factors as 0.085 of the annual premium for monthly EFT, an automatic bank draft, 0.26 for quarterly and 0.51 for semi-annual.[1] Monthly at Banner adds 2% a year, which works out to an implied interest rate of about 4.4%. Quarterly adds 4% and costs about 11.2% as a rate.
- Banner monthly EFT
- 0.085, about 4.4%
- Banner quarterly
- 0.26, about 11.2%
- Stated by
- Banner OPTerm spec sheet, checked November 11, 2026
On this page
Work out your own rate
Copy two lines from your quote or policy schedule, the annual premium and the amount billed per month, quarter or half year. If you only know the factor, type it instead and leave the payment empty. The numbers loaded below are an example.
Why a 2% surcharge is a 4.4% rate
Paying monthly does not just add 2% to the bill. It lets you keep money you would otherwise hand over on day one, and the insurer charges for that. On an annual premium of $1,000 at Banner's factor, you pay $85 on the policy date instead of $1,000, so you hold back $915. Over the next eleven months you repay it with eleven more payments of $85, which is $935. Paying $20 to hold a balance that shrinks every month to nothing is the same as borrowing at about 4.4% a year.
Pine Lake Legacy, which publishes a worked example of its own, makes the same point about a 0.0875 monthly factor. It calls the 5% surcharge closer to a ten percent annualized cost of money.[2] Solved exactly, 0.0875 comes to about 11.3%.
Example. The insure.com sample premium paid four ways at Banner's factors
- Once a year
- $343.00
- Semi-annual, 2 x $174.93
- $349.86, about 8.3% as a rate
- Quarterly, 4 x $89.18
- $356.72, about 11.2% as a rate
- Monthly bank draft, 12 payments of about $29.16
- $349.86, about 4.4% as a rate
The $343 is insure.com's sample for a 35-year-old male nonsmoker, $500,000, 20-year term.[3] The factors are Banner's.[1] Banner would not necessarily charge $343 for that profile. The point is the arithmetic, not the price.
Sample price, checked November 10, 2026
- Male 35, nonsmoker, $500,000, 20-year term
- $343 a year
insure.com's own data on its smoking and life insurance page, modified August 21, 2026. Insurer and health class not named. Assumes the profile shown. Not a quote. Your price depends on your health and the insurer.
The modes compared at one insurer
Semi-annual and monthly both cost exactly 2% more than annual at Banner, yet the semi-annual rate is almost twice as high. The reason is time. With two payments you hold back about half the premium for six months. With twelve, the money you hold back shrinks every month, so the same $2 per $100 buys less borrowing and costs more as a rate. Quarterly is the dearest of the three.
| Mode at Banner OPTerm | Factor | Paid per $100 of annual premium | Extra per year | Implied rate |
|---|---|---|---|---|
| Annual | 1 | $100.00 | 0% | None |
| Semi-annual | 0.51 | $102.00 | 2% | 8.3% |
| Quarterly | 0.26 | $104.00 | 4% | 11.2% |
| Monthly bank draft | 0.085 | $102.00 | 2% | 4.4% |
Checked November 11, 2026. Factors from Banner's OPTerm consumer spec sheet, form CN04022026-2.[1] Rates are our arithmetic, the annual rate at which the payments are worth the annual premium on the policy date.
Other insurers' factors
Each insurer sets its own factors, and few publish them to consumers. Pine Lake Legacy gives these as typical ranges, not quotes.[2]
- Semi-annual about 0.51, quarterly about 0.26.
- Monthly by direct bill about 0.0875, in a range of roughly 0.085 to 0.09.
- Monthly by automatic bank draft from 0.0833 to 0.085. At 0.0833, twelve payments come to the annual premium, so monthly costs nothing extra.
Policygenius puts the discount for paying annually at generally 3% to 5%.[4] At a 0.09 monthly factor the surcharge is 8% and the implied rate is about 18.6%, which is credit card territory.
When paying monthly is still the right call
Monthly makes sense when
- The factor is at or near 0.0833 on bank draft, so the cost is close to nothing.
- The alternative is paying the annual premium from a credit card or a loan that charges more than the implied rate.
- A large once-a-year bill is the kind you are likely to miss.
Annual makes sense when
- The cash is sitting in an account earning less than the implied rate.
- The factor is quarterly or direct bill, where the rate runs past 10%.
- You want one date a year to check that the policy is paid.
Policygenius notes that missed monthly payments can put a policy at risk of lapse.[4] A lapse costs far more than any modal surcharge, especially on a term policy bought when you were younger and healthier.
How to find your own factor
- Ask for both prices. Get the annual and the modal premium in writing from the quote or the policy schedule.
- Ask about bank draft. Pine Lake Legacy notes that the automatic draft factor is often lower than the direct bill one.[2]
- Run the numbers above. Compare the rate with what your cash earns and with what any borrowing costs you.
The same comparison applies when you are shopping. Two quotes that look a few dollars apart a month can swap places once you price them annually, so ask for both when you compare quotes. Rate class moves the price far more than the mode does, and rate classes explains how that is set.
Questions people ask
What is a modal factor?
It is the multiplier an insurer applies to the annual premium to get each payment when you pay more often. Banner's monthly bank draft factor of 0.085 means each payment is 8.5% of the annual premium.
Can I switch from monthly to annual later?
Ask the insurer. Banner's spec sheet says you have options on how often you pay, but it does not say when a change can take effect. Confirm the new amount and the date in writing.
Does paying annually change the coverage?
No. The death benefit and the level period are the same. Only the timing of payments and the total paid in a year change.
Is the monthly premium on a quote the real monthly price?
It is the monthly price at whatever factor that insurer uses for the mode shown. Ask which mode it assumes and whether direct billing costs more than bank draft.
Last updated November 13, 2026. Found an error? Call (305) 699-5857 and it goes in the corrections log.
Sources (4)
- Banner Life, OPTerm Level Premium Plans product information for individuals, form CN04022026-2, no date shown. Opened November 11, 2026. bannerlife.com
- Pine Lake Legacy, What Is a Modal Premium Factor, A Worked Example, August 28, 2026. Opened November 11, 2026. pinelakelegacy.com
- insure.com, Can You Lie About Smoking on Life Insurance, modified August 21, 2026. Opened November 10, 2026. insure.com
- Policygenius, Should You Pay Your Life Insurance Premiums Annually or Monthly, modified June 4, 2024. Opened November 11, 2026. policygenius.com
