Why Life Insurance Premiums Increase?
The most common complaint about life insurance is the increase in premiums every year. Traditional stepped premiums start off cheap and increase every year as you get older. As you get older there is more risk to the insurer this is reflected in the increase premium each year. What starts off as the most cost effective option becomes expensive over time and results in most people cancelling their cover.
Most people take out life insurance to cover debt like the mortgage. Research by Westpac in New Zealand last year revealed the average first home buyer was 34. With a 25 or 30 year term most people will have the mortgage all their working life and well into their 60s.
The issue arises as people in their 50s still with a significant amount of debt can no longer afford their life insurance premiums and are forced to cancel their cover or pay high-priced premiums.
Another option is level premium, it offers a long term affordability with premiums that do not increase with age. Initially level premium is more expensive than stepped however over time cost of the stepped premiums will increase and eventually surpass the price of level premium. You can save thousands of dollars with level premium over the term of the policy and more importantly have affordability when you still require the cover.
Level premium is not available with most banks. Only specialist insurance providers offer this product.
Like most things in life the cheapest option in the beginning can turn out costing you more in the long run. This is true for life insurance.
If you are thinking about taking out life insurance or would like to see how much you can save with your current insurance talk you one of our advisers at Compare Now.