Quote:
Originally Posted by sweeps
I don't have the algorithm obviously
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I know you don't have the information. It would be very very rare if you did. I was just teasing you.
Quote:
Originally Posted by sweeps
Worst case, say you have to pay for a full month. You'd have to pay that full month whether you were paying monthly or you were paying for the full term, right? So the full-termers wouldn't be losing anything, and in fact they would not be paying that extra "convenience" fee.
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I respectfully disagree. For a policy with 6 monthly payments, and you stop in x months, where x is a positive integer less than 6, and a portion of the next month:
Monthly payments total payments:
(x+1) X (monthly payment + monthly installment)
At most, you lose (monthly payment + monthly installment)
Lump sum total payments:
6 X monthly payment
At most, you lose (6 - x - portion of month) X monthly payment
Assuming that the probability and percentage of refund is 0%, for x less than 5, you risk losing more money with the lump sum because you do not know how much you can get back.
If you are 100% certain that you will get back your exact prorated premium, then the lump sum is a better way.
For anything between 0% and 100%, it's a judgement call on your part. For a $24 mark-up, I gladly take the installment approach to eliminate the risk of losing more money.
This is the more conservative approach, and should become more viable the higher your premium becomes, but it ultimately depends on you.
This is even before factoring in opportunity cost had you invested the money. When you add this in, the scale of evidence tips more favorably towards me.