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Life Insurance

What is level life insurance and how does it work?

There are two types of life insurance cover you can apply for. The first, and industry standard cover which is “stepped” cover (also called “rate for age” cover), or the second being “level” cover.

What is stepped cover?

Stepped cover is the most common type of life cover with the life insurance companies we work with at LifeDirect. Stepped premiums start off lower, and increase every year as you get older, this is because there's a higher chance of you claiming your insurance every year. As a result, stepped cover will almost always offer you the cheapest premium.

What is level cover?

Level cover life insurance premiums don't increase with age, instead they'll only increase if you decide to increase your amount of coverage. Level premiums will stay level for a good period of time, usually until age 65 or 80, after this they change to stepped. To get a basic understanding, here is a basic example of how stepped and level cover compare.

Graph visuallising premiums over time for Level and Stepped

What should you choose?

The choice between the two comes down to the number of years you want to keep your cover. Stepped is much cheaper at the beginning (around half the cost of level cover), but because your premiums increase every year, it can get pricey.

Level cover starts out much more expensive, but because your premium remains at the level you first insured for, it will be cheaper in the long run.

If you're not sure what option would work best for you, compare life insurance quotes from NZ's leading insurers with LifeDirect. Otherwise you can fill out a contact form online or give us a call on 0800 800 400 to chat with our Wellington based team.

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