Category: Cost
Stepped premiums start lower and rise each year. Level premiums start higher but stay smoothed until a conversion age (typically 64 or 65), then revert to stepped.
For TPD, five of nine panel insurers offer both structures; four offer stepped only. The cumulative break-even point sits in the mid-40s to early-50s, depending on entry age and insurer.
The premium recalculates on every policy anniversary based on the life insured's current age. Premiums rise each year, and the rate of increase accelerates with age.
Verbatim from the OnePath OneCare PDS (1 October 2025, page 111):
'Under variable age-stepped premiums, we re-calculate the premium on each policy anniversary based on the life insured's age on that anniversary... Variable age-stepped premiums are likely to increase with age.'
The premium is calculated at the age at policy commencement. It stays based on that age until the conversion age, then converts to variable age-stepped.
Verbatim from the Zurich Wealth Protection PDS (1 November 2025, page 82):
'Variable premiums for the benefit amount at policy outset are based on the age of the life insured when cover begins. Variable premiums are averaged out or smoothed, which means they are generally higher than variable age-stepped premiums during the initial years, but lower than variable age-stepped premiums in later years.'
Conversion ages vary by insurer:
Level rates are not fixed forever. Insurers can re-price the underlying class under a Premium Rates Are Not Guaranteed clause. From the OnePath OneCare PDS:
'Regardless of whether variable age-stepped or variable premium is selected, premium rates and premium factors are not guaranteed or fixed and insurers have increased premium rates in the past and may increase in the future.'
Figures are indicative only, not personal advice. They illustrate the shape of the comparison and assume zero insurer rate-table movement (actual cost-of-cover increases will differ).
Setup: $1m TPD, age 35 male non-smoker, white-collar.
The break-even point for this 30-year window typically sits in the late 40s to early 50s. Held shorter than 10 to 12 years, level is more expensive in cash terms. Held longer than 15 years, level is usually cheaper in cumulative terms.
The Zurich Wealth Protection PDS states the design intent plainly:
'If you plan to keep your policy for longer than 10-12 years, variable premiums may save you money over the life of your policy.'
The single most misunderstood feature of level TPD is what happens at age 64 or 65: the premium converts to variable age-stepped at the then-current age. From the Zurich Wealth Protection PDS:
'The impact of the change from variable to variable age-stepped is that the cost will increase substantially on the anniversary when the life insured is 64. This is because the variable age-stepped premium will then be based on age 64, 65, 66 and so on, unlike the smoothed premium for younger ages that applied previously.'
The OnePath OneCare PDS flags the same conversion at age 65 and notes that 'we will remind you about this change when the life insured approaches 65'.
If the plan is to hold TPD cover past the conversion age, model the cost at conversion-plus-1 explicitly, not just up to conversion.
Most panel insurers offer Premium Freeze on stepped premiums above a minimum age:
The dollar premium stays flat each year; the sum insured reduces instead. This gives clients on stepped premiums a way to control late-term premium rises without switching structure (and re-underwriting). Premium Freeze is generally not available on level / variable premiums.
PDS source citations for the verbatim wording above and equivalent provisions across the panel:
See how TPD premiums are calculated for the full list of pricing inputs and stepped premiums / level premiums for the glossary definitions.
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