Stepped Premium

A stepped premium is the default premium structure on most Australian life insurance, TPD, trauma, and income protection policies. Your premium is recalculated each year based on your current age, so the cost rises incrementally as you grow older.

How stepped costs move with age

Yearly increases stay small while you are young, then accelerate substantially. Indicative cost trajectory for the same policy:

• 20s to 30s: low base premium, modest yearly increases.
• 40s: moderate increases as claims risk rises.
• 50s and 60s: large increases as statistical claim likelihood climbs sharply.

Australian insurers are required to illustrate projected stepped increases in the PDS so you can see expected premiums at older ages.

Stepped vs Level at a glance

| Stepped | Level | |---|---| | Lower starting premium | Higher starting premium | | Increases each year with age | Stays at entry-age rate (CPI still applies) | | Cheaper in early years | Cheaper over the long run for cover held into 50s and 60s | | Good for short-to-medium-term cover | Good for cover you intend to hold long-term |

When stepped tends to suit

• Younger Australians who expect income to grow.
• People who plan to reduce or cancel cover later in life.
• Cover horizons shorter than 15 to 20 years.

Step-increase rates differ between insurers, so compare projected future costs (not just today's premium) when choosing a policy.