Final answer:
The higher the frequency of payment schedules for insurance premiums, such as monthly or quarterly, generally results in higher total premiums due to increased administrative costs and convenience fees. Whereas, a single annual payment often results in a lower total premium for the policyholder.
Step-by-step explanation:
The relationship between the frequency of payments and the premiums is that generally, the higher the frequency of payments, the higher the premiums. This can be attributed to additional administrative costs associated with processing more frequent payments.
Insurers may also charge a premium for the convenience of more frequent payments, which can include monthly, quarterly, or semi-annual payment options as opposed to a single annual payment. Conversely, paying the premium in one lump sum can often lead to a lower total cost because it reduces the administrative work for the insurance company and provides them with more immediate capital to invest.
When considering the fundamental law of insurance, it is clear that the average person's payments into insurance must cover their claims, the costs of operating the insurance company, and allow for the company's profits. This principle underlines that the costs associated with offering and maintaining insurance policies are inextricably linked to the manner in which premiums are paid.