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Stepped premium vs. Level premium policies

People who want to buy income protection insurance often wonder if they should opt for stepped premiums or levelled premiums and which out of the two premiums is better for them. Both stepped premiums and levelled premiums have their own advantages and disadvantages.


Stepped premiums

Stepped premiums are preferred by people who want to opt for short term policies since this type of premium allows policy holders to enjoy low premium rates for the first few years. Usually people above the age of 40 are not encouraged to take stepped premiums since after the first few years, the policy holder has to pay an increased amount to the insurance company. People who are looking to take short term policies for 10 years or less and want to enjoy low premium rates for the first few years are usually encouraged to opt for this type of plan.


Levelled premiums

Levelled premiums are preferred by people who want to opt for long term policies since this type of premium plan allows the policy holder to pay a fixed amount to the insurance company every year. Levelled premiums are suitable for people who are 40 years or older and want to plan their finance beforehand. By opting for levelled premiums, people can know how much they have to pay in the future and they can keep this money aside allowing them to renew their policy and enjoy income protection benefits.

Insurance companies in Australia allow buyers to choose the type of premium plan they want. Before choosing one of these premium plans, buyers are encouraged to either talk to an insurance agent or a financial advisor since by doing so they will be able to understand which premium plan is more suitable for them. In most cases insurance companies allow policy holders to switch premium plans however, to do so the policy holder may have to provide additional documents at the time of switching plans.


Factors To Consider

A few other factors that should be considered before buying income protection insurance policies include the number of days or weeks the buyer wants to wait before getting the first payment, the type of contract that is indemnity or agreed value contract and the benefits offered by the insurance company. By choosing the right type of insurance policy you can ensure that your future is secure and that your family doesn’t have to sacrifice their needs if you are unemployed due to health reasons.


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