Some insurance options explained

Some of my insurance clients are looking at options as their insurance premiums start to get expensive.

Just to start with there are two premium options when you take out Life Trauma or Income Protection. They are stepped also known as rate for age or level. CPI (Inflation) adjustments aside stepped will increase each year based on age while level premiums remain the same, although start off more expensive than stepped. Typically level premiums are the way to go if you are in your 20's and 30's and can afford them.

There are a couple of options though to maintain stepped premiums when they become increasingly expensive.

  1. Invoke a premium freeze option which mean the premium stays the same however the cover will reduce on an annual basis. This is a good option when you still require cover but where your budget is fixed.
  2. Reduce your cover periodically. You can reduce Life, Trauma and Income Protection cover at any time via a simple request to your insurer. Note the owner of the policy needs to do this. When premiums are becoming out of hand a request to reduce the level of cover can be a simple solution.