Stepped vs Level Life Insurance Premiums

Stepped and level premiums describe different ways life insurance costs are calculated. Stepped premiums generally rise as you get older. Level premiums use a different age-based pricing structure, but they are not a fixed-price guarantee. Both can increase under the policy terms. Insurers may use names such as variable age-stepped and variable premiums.

What are stepped premiums?

Stepped premiums are usually recalculated at policy anniversaries using your age and the insurer’s rates. They may start lower than comparable level premiums, but the cost can rise over time. Changes to cover, policy fees, discounts and insurer pricing can also affect what you pay.

What are level premiums?

Level premiums generally use your age when cover starts to calculate the base rate for that cover, subject to the policy terms. They may start higher than stepped premiums. Insurer rate changes, indexation, additional cover and fees can still increase the amount payable. Some policies switch to an age-stepped structure at a specified age.

How do you compare the total cost?

Ask for illustrations for the same cover amount, benefits and policy settings over the period you expect to hold cover. Check the assumptions and remember that illustrations are not guaranteed future prices. There is no universal point at which level premiums become cheaper, and neither structure is always the better option.

Check these details before choosing

Compare the initial premium, possible future increases, cover indexation, fees, discounts and any change in premium structure at older ages. Review the policy’s benefits, exclusions and definitions alongside its price. A lower premium does not necessarily mean equivalent cover.

Can you change premium structure later?

Options depend on the insurer and policy. A change may involve different pricing, eligibility requirements or a new application. Before replacing existing cover, compare the new terms and ask about any underwriting, exclusions or waiting periods. Keep existing cover in place until replacement cover has been accepted and you understand when it starts.

Frequently asked questions

Are level premiums guaranteed to stay the same? No. Check the Product Disclosure Statement and policy schedule for the circumstances in which premiums can change.

Are stepped premiums always cheaper at the start? They may be lower for comparable cover, but actual quotes depend on the insurer, product and application.

Is there a guaranteed saving after ten years? No. Total costs depend on future rates, cover changes, policy terms and how long the policy is held.

Compare life insurance premium options

Covermate Life helps you compare policy information and request quotes from participating Australian insurers. Ask our team to explain available premium structures and the assumptions behind a quote.

General advice only. This information does not consider your personal objectives, financial situation or needs. Read the relevant Product Disclosure Statement and Target Market Determination, where applicable, before deciding.

Sources: Australian Financial Complaints Authority, Insurance premium increases factsheet; TAL, Our premium options.