Generally premiums start off low and increase over time. As you get into your mid to late 40’s the premiums start to take off and continue to increase as you are more likely to suffer from cancer, stroke, heart attack or even premature death. This is called stepped premiums.
Stepped Premiums are good when you need a high level of cover for the short term i.e. you have a large mortgage, have children that are still dependent on you financially and need affordable premiums. As you get older it is important to review these options and look at levelling some or all of your cover.
Level Premiums are fixed for specified period of time. Premiums start off higher than stepped premiums but quickly become less expensive as they are guaranteed never to increase due to age. Over the long term Level Premiums will save you thousands of dollars on your insurance premiums. It does require long term thinking and a commitment upfront ie you are paying more than you have to now (opportunity cost) but you will see the benefit in the long term. As shown in the graph:
In the example the insured would have paid a staggering $414,000 less in premiums by choosing level over stepped by age 79.
Level premiums are a good fit for those that would like to keep some level of life insurance after age 60 that is affordable. Reasons for this could include debt repayment, retirement savings boost, legacy/inheritance, tax liabilities, estate liquidity, funeral expenses etc.
Please contact us if you are interested in discussing this further.
