If a policyowner pays premiums more frequently, how does it affect the cost of the policy?

When a policyowner pays premiums more frequently, such as monthly instead of annually, the cost of the policy tends to increase. This increase is attributed to the concept of "premium loading," where the insurer adds a cost associated with the increased frequency of premium payments. Insurers often anticipate that more frequent payments can lead to a higher administrative burden and risk of payment defaults.

Moreover, with more frequent premiums, there may be interest considerations; insurers may not have the same cash flow benefits as they do with a lump-sum annual payment, affecting the overall cost structure. The financial logic is that insurers price products with the understanding that there's an opportunity cost associated with the frequency of payments. Thus, while the coverage remains the same, the cost of the policy does increase due to the more frequent payment schedule.