Stepped Premium

Stepped premiums are the most common premium structure in Australian life and health insurance policies. Under this arrangement, your premium is recalculated each year based primarily on your current age, meaning it increases incrementally (or 'steps up') as you grow older. For young Australians in their 20s and 30s, stepped premiums are often very affordable, making insurance accessible during the early working years. However, the annual increases can become significant in your 50s, 60s, and beyond, when the statistical likelihood of making a claim rises substantially. Australian insurers are required to illustrate projected premium increases in the PDS, showing you what premiums might look like at different ages. The advantage of stepped premiums is immediate affordability and the flexibility to reassess your cover as your circumstances change. The disadvantage is long-term cost - over a lifetime, you'll typically pay more in total premiums compared to level premium structures. Many financial advisers in Australia recommend stepped premiums for younger people who expect their income to grow, or for those who plan to reduce cover later in life. The actual step increases can vary between insurers, so it's important to compare not just current premiums but projected future costs when choosing a policy.