Level vs stepped premiums
The choice of stepped or level premiums can have a large impact on the affordability of insurance over your lifetime. While stepped premiums are usually lower in the early years, level premiums can be more cost- effective, so it’s easier to hold insurance over a longer period.
Rob, non-smoker, takes out $1 million of life cover at age 35.
|Age next||Level premiums per||Stepped premiums|
|birthday3665Total premiums over 29 years||annum$906$8,016$84,835||per annum$600$27,250$196,745|
*based on Asteron Life Complete life cover at 20 September 2013, white-collar professional, indexation rate of 3%
While the stepped premium is cheaper initially at $600 pa compared with level premiums of $900 pa, by age 65 the level premium is only $8,016 whereas the stepped premium is a whopping $27,250. Over 29 years, Rob can save $111,910 by choosing level over stepped premiums.
Insurance in super
Insurance in super is another strategy we can use to address affordability and cash flow concerns.
The cost of insurance through super may be more affordable compared to policies held outside super. The fund may be able to offer group rates, the fund can claim a tax deduction for the cost of insurance and this tax saving is generally passed to the member in the form of a reduced premium. Premiums can be funded from concessionally taxed super contributions. For these reasons, insuring in super can be more tax-effective than insuring outside super.
Cancelling insurance may be trading long-term security for short-term savings. A risk of dropping insurance is that it may be unavailable or more expensive if taken up again later.
The best defense against financial disaster is to stay covered so talk to us today to find out your best option.
Source I Asteron Life