It’s the perennial question when it comes to life insurance: should you opt for a level premium or a rate-for-age premium?

Rate-for-age premiums are based on your age: the younger you are, the cheaper your premiums are. Covers are purchased at today’s age and premiums increase every year.

The alternative is to use level premiums. The premium does not increase every year. You will pay a little bit more at the outset than a rate-for-age plan initially, but it will make things much easier for you when you’re older, so you can still afford to keep your covers when you need them the most.

We see doctors in their late 50’s and 60’s have to cancel their policies. It was not because they don’t need those covers any more, but the covers were too expensive to keep.

In this article, let’s look at the premium difference on life cover.

At age 30, the rate-for-age premium of $500,000 life cover is about $35 per month for a male, and around $25 per month for a female. At age 65, this cover can cost up to $605 per month for a male, and around $400 per month for a female. At age 80, it balloons to $3,702 per month for a male and around $2,785 per month for a female (all prices for non-smokers).

On the other hand, if you arrange a level premium at age 30, it can be purchased for around $109 per month for a male and around $75 per month for a female. At age 40, it will cost $136 per month for a male, and around $99 per month for a female. The most important part is that you’ll pay the same price for the same insurance cover until age 80 (again, all prices for non-smokers)

The following graphs illustrate  the differences between the two costs of rate-for-age premiums and level premiums over the long term. Level premiums are not only lock in the premium, but also save money for you as well. The total saving on premium is about $343,000 for men and around $240,000 for women.

                      

To find out whether level premiums are right for you, call us now on 0800 585898 or email info@lifestyleinsure.co.nz. One of us will get in touch with you within 24 hours.