Stepped vs Level Insurance Premiums

Wondering which is best, level life insurance premiums or stepped premiums? It’s a question we are all posed with when selecting a life, income, or trauma policy. We reveal what you need to consider before choosing which premium structure suits you best.

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Level premiums

Level premiums stay consistent until you turn 65. After your 65th birthday, your level premiums change to a stepped premium type structure. However recently there are some select insurers who have extended their level premiums to age 70.

What’s good about level premiums?

Over the long-term, this premium structure is typically cheaper compared to stepped premiums. You’ll also know well in advance what your premiums are, thus helping you make plans to pay for your cover.

The only downfall is that premiums will be higher early on, compared to stepped premiums.

Stepped premiums

Stepped premiums increase as you grow older. This option is the most common because premiums start off cheaper. However, over time, the premiums can increase dramatically often becoming more expensive compared to level premiums in your later years.

Stepped vs level premiums, which is best?

It all depends on your situation and how long you plan to hold your insurance policy for. If you need life insurance for a longer time, level premiums may be better. If you only need your policy for a short period of time, stepped premiums may be better. But you should also consider what you can afford, and the type of coverage offered.

If you are in doubt as to whether stepped or level life insurance premiums are better, it might be worth comparing policies and reviewing the difference. 

*Graph data based on 33-year-old male non-smoker, with $500,00 Term Life Insurance & $250,000 TPD Insurance.

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Published: July 4, 2017
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