An interesting finding came out today from a leading life insurance provider which I couldn’t resist writing about as it’s something that is close to my heart. They found that the highest peak of ‘living insurance’ (income protection, trauma, and TPD) cancellations were between the ages of 45 – 50 years of age and that a high percentage of these clients were suffering from a claimable event only 1.5 years after their policies were cancelled.
This to me wasn’t a huge surprise, more often than not clients are placed on a stepped premium structure to make the premiums more affordable initially. But this short-term affordability may be hurting your wallet more than you know. . . granted, stepped premiums are cheaper than level premiums initially but these premiums increase each and every year, sometimes by extraordinary amounts as you get older and more likely to claim.
I’ve completed a comparison on a 30 years old male, non-smoker who takes out $250,000 of trauma cover on both stepped and level premiums and you will be stunned to see the increases in premiums. It starts out nice enough with year one being only $48 a month for stepped and $81 for level. “Wowsa”, you may say “That’s an incredible premium for level!”. But you need to look longer term, level premiums can have small increases from time to time but they are negligible when compared to the increases in stepped premium and would only happen perhaps once every couple of years if at all (depending on the policy). When you compare the same individual at 10 years the premium for stepped is now more than level at $99 a month. At 15 years (the magic 45 years of age) the premiums has almost doubled in just 5 years and is now $175 a month. Is it any wonder that most cancellations happen at this age? I did leave the best to last for you, can you believe that at age 60 the premium on stepped is a staggering $1,003 per month or $12,039 per year.
The whole idea of insurance is having the right cover at the right time. When it comes to personal insurance you are protecting the most important person when it comes to accumulating wealth for your retirement and your family . . . . ‘YOU’. Consider level premiums for all or part of your cover to ensure that you do have the RIGHT cover at the RIGHT time.
Contact me for a complimentary review of your insurances today. Are you paying too much?