Yearly, Half-Yearly or Monthly? What LIC's Mode Rebate Is Really Worth

Every LIC proposal form asks how you want to pay. Most people tick monthly because it is easiest on the cash flow, and most people are never told what it costs. It is not a large number, but it is a certain one, and it runs for the whole term.

The rebates

LIC applies a mode rebate to the tabular premium:

Mode	Rebate	Instalments a year
Yearly	2%	1
Half-yearly	1%	2
Quarterly	Nil	4
Monthly (NACH)	Nil	12

That is the entire mechanism. There is no penalty for paying monthly — there is simply no discount, while yearly payers get 2% taken off the rate.

What it comes to

Take a ₹5,00,000 New Jeevan Anand at age 30 over 21 years, where the tabular rate after the high sum assured rebate is about ₹54.40 per ₹1,000.

• Yearly: ₹54.40 × 500 × 0.98 = ₹26,656 a year
• Monthly: ₹54.40 × 500 ÷ 12 = ₹2,267 a month, or ₹27,200 a year

The gap is ₹544 a year. Over 21 years, ₹11,424 — about five months of premium, for nothing.

On a larger policy the arithmetic scales directly. A ₹25 lakh sum assured on the same terms gives up more than ₹57,000 across the term by paying monthly.

Why monthly still wins for some people

The rebate is not the only consideration.

Lapse risk is the real cost. A policy that lapses because ₹27,000 fell due in a month you could not manage costs vastly more than 2%. If monthly instalments are what keeps the policy in force, pay monthly and do not think about it again.

Cash flow has a value. If the alternative to paying yearly is running a credit card balance at 36% for two months, the 2% rebate is not the expensive option.

The float is worth something. Paying ₹2,267 a month rather than ₹26,656 in April means the money sits in your account earning something for part of the year. At 6% in a savings account that recovers roughly a third of the rebate. Not all of it — but the gap is smaller than the headline 2%.

The practical answer

If you can genuinely afford the annual premium in one go without borrowing, pay yearly. It is the cheapest option, it is one transaction a year, and there is no chance of missing an instalment.

If you cannot, pay monthly by NACH and stop worrying about it. A policy in force at 2% more is worth infinitely more than a lapsed policy at the discounted rate.

Half-yearly is a reasonable middle: it takes 1% off and halves the size of each payment.

One thing to check on the quote

The mode rebate is applied to the tabular premium, and the high sum assured rebate is applied before it, as a reduction in the rate per thousand. Getting the order wrong changes the answer slightly, and some online calculators do get it wrong. Every calculator on this site applies them in LIC’s order — you can see the tabular rate and the sum assured rebate broken out separately in the results, for example on the New Jeevan Anand calculator.

Also worth knowing: since 22 September 2025, individual life insurance premiums are exempt from GST. If you are comparing against an older quotation showing 4.5% on the first year and 2.25% on renewals, your actual outgo today is lower than that document suggests.