There are a number of insurance covers that offer both Levelled or Stepped options. Life and Trauma are the main ones we think of. When we take out personal cover there are a number of considerations that your advisor will discuss with you. Firstly the type of cover must suit your current needs, your age and the purpose it has been designed for. Importantly, it must also be affordable over time and this is where the services of your advisor are invaluable as they can give you quotes against both stepped and levelled options.
While you will always find that quoted “Stepped” or “rate for age”premiums are always cheaper than “Levelled” at time of application, the key question that you and your advisor must consider is that of affordability over time. Industry statistics are showing that clients with stepped cover are more often cancelling their cover before they are most likely to claim; due to cost, as year by year, premiums continue to rise. In fact 85% of people with life cover, never receive a payout at time of death because they have already cancelled it. In the 20 year period for people aged between 40 and 60, Stepped Life premiums typically rise by 500%, trauma rises by nearly 1000% and health premiums rise by over 1000%. Extend that time frame from age 40 to 70 and you will find that these figures have doubled again.
The question for you as a client to consider is. . . Do you want to have a satisfactory level of cover as you go through your fifties, sixties and beyond and how can this be made affordable and sustainable over time? If you are able to achieve this for both your Life and Trauma cover, then you are more likely to find that once you retire and your monthly income is drastically reduced, that you will have a suitable level of insurance cover that can be sustained and affordable well into retirement, at the very age that you are most likely to need the cover. Unfortunately health cover cannot be levelled and premium rises can only be managed by increasing the excess.
Fixing or levelling any existing “Stepped” Life and Trauma premiums will ensure that you can achieve this. The downside of this is that should you wish to maintain your current level of cover, a “Levelled” premium will cost you more. Conversely, you can maintain the same premium, but you will have to accept a reduced level of cover.
You may find that having a mixture of the cheaper “Stepped” premiums as well as the level, may be an option, to cover those shorter term risks, such as having dependent children at home or having a mortgage. It needs thinking about and your advisor is there to help you. So please do make contact with me and ask for a review.