Every year on your anniversary date, your risk insurance premiums typically increase. The amount of the increase will fluctuate each year, but it is helpful to know that there are three main factors that cause your premiums to rise.
The third point is the most interesting. Here’s why.
You can fix your life and trauma insurance premiums so that they are ‘level’ and will not increase as you age. With level cover, your premium is designed to remain the same for your chosen timeframe. This can be 10 years, to age 65 or to age 80.
Generally, your initial premium is higher, but the premium remains constant over the set timeframe and can end up saving you a lot. The younger you are when you take out level cover, the greater savings you will make.
The younger you are when you take out level cover, the greater savings you will make.
As the premiums are initially higher, it is usually recommend that you only fix some of your insurance. For example, if you take out life insurance to cover your mortgage you probably wouldn't fix this cover as you hopefully won't need it for too long.
On the other hand you may want to fix, for example, $200,000 of your life insurance with the intention of keeping this cover in place until you turn 80—this may be to cover things such as clearing outstanding debt and funeral expenses. By doing this you will guarantee that you will get affordable life insurance cover as you get older—the time when you need it most.
The total level premium paid to age 80 is $29,295.
If stepped premium was chosen i.e. premiums increase with age, then the total stepped premium paid to age 80 would be $204,289.
This is a total saving of $174,994. While this is only an example, it does offer some valuable food for thought. Talk to your insurance adviser to find out if level cover is right for you.
Want to find out if you've got the right level of cover for your age? Check out our free infographic below!