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Understanding Stepped Premiums: A Detailed Guide
Stepped premiums are initially less expensive than level premiums. However, depending on when your insurance was implemented (considering your age and occupation at the time), a stepped premium may eventually become more expensive than a level premium. This shift depends on factors like your age, occupation, and the duration of your policy.
Factors Influencing Stepped Premium Increases
Indexation
Changes to legislated government stamp duty in each State and Territory can affect the cost of your insurance premiums. Depending on your coverage, you may be legally required to pay stamp duty, which is reflected in your life insurance premiums.
Premium Rate Reviews
Life insurance companies periodically review premium rates. If the cost of coverage increases beyond the insurance companies’ expectations, a rate increase may apply to all customers. These revised premiums could result from an increase in claims or changes in the economic environment. In such cases, the insurance company will notify clients of these changes.
Expiry of Discounts
In certain circumstances, stepped premiums may increase due to the expiration of initial or term discounts on policies like Life, Total and Permanent Disability, Trauma, and Income Protection Insurance.
Policy Changes
Any changes you request to your policy in line with your evolving needs can also affect stepped premiums. These changes might decrease your premiums. For instance, you can remove optional benefits or have loadings reviewed if they have been applied to your policies.
Managing Increasing Premiums
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Morgan Insurance Brokers
All information above has been provided by the author.
Morgan Insurance Brokers, ABN 28 628 815 074, AFSL 327131
This article originally appeared on Understanding Stepped Premiums: A Detailed Guide and has been published here with permission.