Life insurance premiums can be either stepped or level premiums. A simple way of thinking about it is that stepped premiums go up as you get older, while level premiums are not fixed to your age.
The
price of your premiums
- whether quoted outside of a policy or within an active policy, the price of your premiums tends to increase with age as you get older. It makes sense because the older you are, the more likely you are to make a claim.
Stepped premiums usually start lower than level premiums but will
increase as you get older
. Depending on other factors, such as your policy type, your annual life insurance premium could even increase by as much as hundreds of dollars in just the first few years.
Level premiums are a little more stable as they are not linked to your age. They will be a bit higher than stepped premiums at the start, but any rises are not linked to your age – your costs will only rise if your insurer puts the premiums up and your premiums rise with inflation.
Some insurers also offer hybrid premiums, which is a combination of level and stepped premiums. Hybrid premiums are initially more expensive than stepped premiums, but are generally cheaper than level premiums. Hybrid premiums increase over a set period of time and then lock into a premium once you turn a certain age.