What are Stepped premiums? When the cost of your cover is recalculated each year based on your age at your policy anniversary. Generally, this means your premium will increase each year as you get older
What are level insurance premiums? Level-premium insurance is a type of life insurance in which premiums stay the same price throughout the term, while the amount of coverage offered increases. With level premiums you often pay a higher premium initially when compared to a rate for age premium, but you can save money throughout the life of the policy.
Typically, there are two main factors that determine an increase in insurance premiums; these are whether you have cover based on rate for age premiums and if you have selected to have your cover linked to the Consumer Price Index (CPI).
Rate for age premiums A rate for age premium option means that your premium increases each year in line with your age i.e. the younger you are the cheaper your premium will be, as from the insurers point of view, the chances of you making an insurance claim is lower when you are younger. On the other hand, as you get older the risk to the insurer increases and this is reflected in your premium.
CPI Linked If your policy is CPI linked, your sum assured will increase every year to keep pace with inflation. For example, if you had cover of $100,000 and inflation was 3%, your sum assured would increase to $103,000. This option ensures that the purchasing power of your sum assured is not depleted. Your premiums will increase to reflect the new sum assured each year.