Level Premiums
Level premiums are designed to remain relatively stable over time, helping make the long-term cost of your insurance more predictable.
When you take out an insurance policy, you may have the option of choosing between level premiums and stepped premiums. With level premiums, you generally pay a higher premium when you first take out your policy, but the premium is designed to stay the same or have low increases while the policy is in place.
This option can be appealing if you're planning to keep your insurance for many years. Although the initial cost is often higher, level premiums may become more cost-effective over the long term because they don't increase each year simply due to your age in the same way stepped premiums do.
With level premium structures, it is important to note that your level of cover does not increase. This is the opposite of stepped premiums where both your level of cover and premiums increase each year.
Choosing between level and stepped premiums depends on your budget, financial goals and how long you expect to keep your insurance. An adviser can help you compare the long-term costs and determine which option is most suitable for your circumstances.
Why It Matters
The way your premiums are structured can make a significant difference to the cost of your insurance over time. Understanding how level premiums work can help you choose an option that aligns with both your current budget and your long-term financial plans.
Common Misunderstandings
"Level premiums never increase."
Not necessarily. Some policies have it within their policy wordings that the premiums will not increase for the lifetime of the policy, others will increase at certain age ‘bands’ such as at 40, 50 and 60 years old etc. It’s important to be aware of these so that they are not a shock when they occur.
"Level premiums are always cheaper."
Not at first. They usually cost more initially but may provide better value over the long term - typically after 5 years of your policy being in force it is cheaper than a stepped policy that started at the same time.
"Everyone should choose level premiums."
Not always. The right option depends on your budget, how long you intend to keep your policy and your financial goals.
"I can't change my premium structure later."
Some insurers allow changes between premium structures, although this may be subject to conditions and could require underwriting.
FAQs about Level Premium
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Level premiums are designed to remain relatively stable over time, with little to no age-related increases compared to stepped premiums.
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Level premiums generally cost more initially but increase more gradually, while stepped premiums start lower but usually increase each year as you get older.
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They may suit people who plan to keep their insurance for the long term and want greater certainty around future premium costs.
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Some insurers allow this, although it depends on the policy and your circumstances.
Choosing the right premium structure can make a big difference to the long-term affordability of your insurance. If you're unsure whether level or stepped premiums are the better fit for your needs, talk to a New Vision Financial Services adviser. We'll help you compare your options and choose a solution that supports your financial goals now and into the future.