There are a number of insurance covers that offer both Level or Stepped (rate for age) options. Life and Trauma are the main ones we think of. When we take out personal cover there are a number of considerations that our advisers 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 and this is where the services of your adviser are invaluable as they can give you quotes against both stepped and levelled options.
While you will always find that quoted ‘Stepped’ premiums are always cheaper than ‘Level’, 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 affordability, as year by year, premiums continue to rise.
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 and sixties 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 maintained and affordable well into retirement, at the very age that you are most likely to need the cover.
Fixing or levelling your 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 Level’ premium will cost you more. Conversely, you can maintain the same premium, but you will have to accept a reduced level of cover.
Thus the final question that you need to consider is how do you manage your risks and costs over time? You will find that at a younger age, the cheaper ‘Stepped’ premiums may be the best option, but at some point you may need to consider switching some ‘Stepped’ premiums to ‘Level’, so that by the time you retire you just have Level affordable premiums left.
It needs thinking about and your adviser is there to help you.
So please do make contact with us and ask for a review.