Stepped or Level Premiums for Life Insurance?

When looking for the right Life Insurance policy within Australia, it is important to consider which premium structure you would like to choose. Stepped premiums are great in the short term, though will end up costing you a lot more in the longer term.

“When discussing with clients, I always ask for how long they see themselves needing life insurances and income protection.” says Peter Kaleta Principal Adviser from Life Shield. ”If the answer is ‘long term’ (greater than 5-10 years), then it is worth considering a level premium structure for their new policy.”

Normally you are only told about stepped premiums as these are the cheaper option, at least initially and therefore is easier for the broker to ’make the sale’. Stepped premiums are re-rated each year at renewal as per the client’s age and therefore the cost goes up. The older you get, the higher the increase is. The problem here is, that once you are in your fifties and even sixties, the cost of your insurance becomes so high that often clients are forced to either reduce their benefit or cancel the cover all together. This potentially leaves the client without the required cover at a time when they need it most.

Level premiums do not have age based increases and therefore do not have the dramatic increases in cost over time. In fact, the only increases in cost that you will have on your policy are due to CPI (Consumer Price Index – linked to inflation of between 3-5% pa) (and the sum insured will also increase each year by this amount) or general rate increases imposed by the insurer.

Level premiums give you the certainty of knowing what you will pay for your insurances up to age 65 in most cases. Once you are of age 65, the premium will revert to a stepped structure and therefore begin to increase each year.

As an example, a male aged 40 with $100,000 of life insurance will pay approximately $15 per month (depending on which company is chosen) initially and a total spend up to age 65 of almost $15,000. On the level premium structure the same person will spend initially $24 per month however up to age 65 the total cost is less than half at $7,000.

Initially there is the cash flow issue as you will be paying more than you need to, however in the longer term the cost of a level premiums structure will be well below what you would on a stepped premium.  

More information – visit www.lifeshield.com.au

Life Shield helps Australians review and compare Life Insurance, Income Protection policies in order to ensure that they have the best cover for their needs.

So you financed your car through a dealership and are paying outrageous interest on your auto loan.  Your payments are through the roof and your interest rate is too high. At the time, the finance guy at the dealership told you this was the best he could do for you because your credit wasn’t great.  This probably wasn’t exactly true, but this is how auto loan finance people make their money- they tack on extra interest to your loan and get a little extra for them in the process.  The good thing is that you’ve been making your payments on time and now your credit doesn’t look so bad, so why are you still paying the high rate that your car dealership finance guy stuck to you?  He made some money off of you by adding a couple of points to your interest rate, so now it’s time for you to take back your financial freedom and lower your interest rate on your auto loan by refinancing at a lower rate.

By refinancing on your auto loan, you can get a much lower rate on the amount you still owe on your auto loan and wind up saving up to $100 monthly.  That can add up to $6000 dollars over the life of the loan, which can mean really big savings for you.  Not to mention that since the federal rate is so low, the chances that you will drop your auto loan interest rate by at least a couple of points are high, so you should very seriously consider refinancing your auto loan at a lower rate.

When you’re having trouble making your monthly auto loan payments, but your credit is still okay is when you should be taking steps to refinance your auto loan.  This time around, you won’t go through a dealership to get your auto loan refinance, you will go through one of the many direct lenders who deal with auto loan refinance to get a lower interest rate and a lower monthly payment.  Then the next time you buy a car, you will use your borrowing power differently and not let your financing needs fall to the finance guy at the dealership, but you will secure an auto loan on your own, with a decent interest rate that you will never have to refinance.

You shouldn’t refinance your auto loan at a lower interest rate if you only owe $2000 or less, because you’ll just set yourself back by extending the term of your loan, but if you owe more than $5000, you would definitely profit by refinancing your auto loan if your have a high rate.  Remember, the goal with an auto loan refinance is to get a lower interest rate than you secured with your previous lender and lower your monthly payments by adjusting the current terms of your auto loan refinance.  You hopefully can lower your payments by as much as $100 monthly, which can really go far in an economy where every penny counts.  Don’t wait, refinance now before you run into trouble paying your current high interest auto loan.

If you are looking for information on auto loan refinance interest rates, contact a professional today.