Fixed (AKA level) premiums are more common for life insurance policies, but many providers also offer them for trauma. If you’re reassessing your trauma cover, here are five reasons why you should consider a fixed premium policy.
As you age, the likelihood that you’ll suffer from a major trauma event, namely cancer, a heart attack or stroke, rises. However, on a standard, or stepped trauma insurance policy your premiums rise too, by as much as 15 per cent every year in your 50s.
However, fixed premiums—also known as level premiums—offer an affordable alternative. On a stepped premium (also known as “rate for age”), your rates rise every year, while a fixed premium stays “level” or fixed throughout the life of the policy. Fixed premiums start off more expensive than standard “rate for age” premiums, but you’ll reap the benefits later when at age 64 you’re still paying $138.60 per month, while those on standard stepped policy are paying between $810.13 and $975.63
*Based on 35-year-old male fixing a $200,000 trauma insurance policy to age 70.
The trick: get in early.
We’re living and working for longer. In our current economic climate, many Kiwis will still be paying off their mortgages well into their sixties. Moreover, more people are choosing to start families later in life, or begin a second family, which means they need to continue working in order to support their dependents. And with 27 being the average age for Kiwi kids to move out of home, their dependence could extend well beyond that1.
That’s why it is sensible to “lock in” or fix your premiums early to avoid them rising to a point where they become unaffordable. With a level premium, you can enjoy long-term cover and peace of mind.
3. The option to combine
If you’re on the younger side, you may choose to start off with a standard policy to save money initially, and then convert to a level premium before the costs start to rise.
Most trauma insurance providers will offer fixed premiums, or the option to switch from standard to fixed. For those that do, it provides the flexibility for you to structure your policy in a way that suits your needs and lifestyle. In a nutshell: you can get the best of both.
At BRAVEday, we often recommend fixing part or all of your life insurance first, then moving on to fix your trauma cover. Trauma insurance is roughly double the cost of life insurance, so this can be a good strategy for keeping the costs affordable early on.
4. Less risk of exclusions
By fixing your insurance premiums, you won’t have to shop around in the hopes of finding a better deal. And because you don’t have to change providers, there’s less risk of your new policy excluding any pre-existing conditions. For example, if you had a pacemaker implanted while on your old trauma policy, your new provider may refuse to cover you if you suffer from a heart attack.
5. Trauma is where we see the most claims
Trauma claims are one of the most common claims we see at BRAVEday. And we’re not alone. For one New Zealand insurance company, trauma claims made up 41 per cent of all its claims2. Considering all the different types of insurance you can have—health, car, home and contents, life, travel—for trauma to take up such a whopping piece of the pie shows that many Kiwis come to lean on it in times of need.
What’s more, medical advances mean that people are able to survive cancer and other serious illness. However, it can be a long road to recovery and survivors often continue to suffer from impairments that can put significant financial strain on them and their families for months, if not years.
This—combined with the increased risk of illness as you age—is why it is important to consider your trauma cover carefully, and choose an option that will protect you and your family should the unthinkable happen.
1. TVNZ, 2017.
2. NZ Herald, 2018.