Affordability, both in the short and longer term, is a key consideration when it comes to life insurance.
As you know, insurance premiums usually increase with age. They generally start at their lowest levels when you're young and then, year after year, as you age and the likelihood of claiming increase, they keep rising.
But what if we told you that there's a way to fix your life insurance premiums - for life? Let us introduce you to another type of premium...
Level premiums, in a nutshell
You probably already know stepped premiums, as they are the most common premium type. They're age-related, which means they start relatively low and steadily increase as you get older.
But with life insurance, you have the option to select another type of premium, one that remains steady over time: level premiums.
Level premiums are usually higher than stepped premiums at the start of the policy, but unless you change your cover, they stay the same throughout the duration of the contract. And this is likely to save you a lot of money when you get older.
Stepped or level: which one is for you?
Generally speaking, your 30s and 40s are a good time to consider level premiums. But remember, one size doesn't fit all: depending on your circumstances, stepped premiums may still be more appropriate for you. The choice comes down to a key question: What's most important to you, short or long-term affordability?
Depending on your financial situation, (lower) stepped premiums may fit more comfortably into your budget. But if you can afford higher premiums and plan to hold on to your cover, level premiums can:
- give you budget certainty
- save you money down the track
- help you keep the cost of insurance affordable long term.
Do you think your need for cover may change?
This is another important question. Some people may need less cover later in life, for example after years of paying down the mortgage. In that case, stepped premiums may be appropriate, as you can comfortably adjust the level of life cover (and save money) down the line.
On the other hand, if you think the level of life insurance you need won't reduce, level premiums may be a better option: locking in your premiums now could help you ensure that your cover remains affordable in the future, right when you need it most.
Get in touch with our friendly advisers
Not sure whether stepped or level premiums are the most appropriate solution for you? Get in touch: our friendly LifeDirect advisers are here to answer all your pressing questions. Give us a call on 0800 800 400 or message us here and we'll get back to you in a tick.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.