What is modal premium?
Modal premium is the amount actually billed each time premium is collected — the monthly, quarterly, semi-annual or annual payment. Paying more frequently usually costs the client more over a year, because carriers apply a modal factor to non-annual payments.
Mode is a small detail with real consequences on both sides. For the client it changes the total cost of the same coverage. For persistency it changes the failure rate: monthly bank drafts fail far more often than annual payments, simply because there are twelve chances instead of one.
Draft date matters as much as mode. A draft landing the day before payday is a lapse waiting to happen, and moving it is usually a two-minute conversation nobody has.
| Annual mode | $1,200 |
|---|---|
| Monthly mode at a typical factor | ~$105/mo = $1,260 |
| Extra paid over a year | ~$60 |
| Chances to fail per year | 12 vs 1 |
Modal factors vary by carrier. The persistency effect is the bigger issue.