Considering income protection or life insurance? Stepped vs level insurance premiums explained…

Australians face a rising cost of living in an unstable political and economic environment. Such uncertain times have led to many parents investing in income protection and life insurance policies.

But choosing a premium to protect your family from the burden of debts and expenses can be confusing.

One of the most important considerations is: stepped vs. level insurance premiums.

If you’re considering income protection or life insurance, your decision can end up costing or saving you tens of thousands of dollars.

There are pros and cons of both. So it’s really important to understand your options and decide which is best.

That’s made a little easier for you below…

Stepped vs. level insurance premiums

Which type of premium is the best for your needs?

Stepped insurance premiums

Stepped insurance premiums are calculated using your age.


As we age, we’re naturally at a higher risk of developing illnesses, being involved in accidents, or dying.

Premiums understandably rise as you age to reflect this increased risk.


Stepped premiums are not fixed and may severely increase without warning. Changes to your lifestyle (for instance, your occupation) that are considered hazardous may also cause a significant increase in your premium.



For younger individuals, stepped premiums will begin cheaper than level premiums. Young individuals seeking short-term insurance coverage (approximately seven years or less) are likely to pay less by going with a stepped premium option.

Level insurance premiums

Level insurance premiums remain constant throughout the policy period.

However, adjustments for inflation are added to your premium (Note: inflation adjustments are also available for stepped policies).



The age at which you take out the policy will be used to determine the premium. The older you are when you become insured, the more expensive the premium will be.


A level premium begins more expensive for younger individuals than a stepped premium. However, a long-term level premium (approximately eight years or more) can produce savings of 30, 40, or even 50 percent overall.


Considerations before deciding on a stepped or level insurance premium

There are important considerations to make before choosing a premium for income protection or life insurance.

Start by considering the following:


  • How long you intend to keep the policy;
  • If your occupation may potentially cause steep premium increases (on level premiums, particularly); and
  • Whether you can afford the premium in your current financial position.

 

We’re tax accountants based in Cannington - but we do a lot more than just tax.

If you need our help to determine which premium is the best for keeping your family protected, feel free to contact us.


Need help with your accounting?

Find Out What We Do

What does “comfortable retirement” really mean?

July 14, 2025
What does a “comfortable” retirement mean to you? For some, it’s travel and lifestyle. For others, it’s simply having the bills paid on time without stress. Whatever your version of comfortable looks like — the key is planning. We’re here to help!

What is a Clearance Certificate? Why do you need one when selling property?

July 14, 2025
Selling property in Australia? Don’t forget your Clearance Certificate — it could SAVE you THOUSANDS at settlement. If you don’t have one, the buyer is legally required to withhold part of your payment — delaying and reducing what you receive. Applying is free and easy — and Ascent Accountants can help you get it sorte

Is your TPAR lodged? Don’t be penalised this August.

July 14, 2025
If your business paid contractors during the last financial year — think tradies, cleaners, and more — you may need to lodge a Taxable Payments Annual Report (TPAR). Missing it (deadline: 18 August!) can lead to late penalties. Not sure if you need to lodge or what to incl

June 30 Checklist for Business Owners

June 12, 2025
June is zooming by! Here’s another handy checklist for business owners—let’s get you sorted for EOFY and tick off those to-dos.

Our EOFY Guide for Taxpayers.

June 12, 2025
EOFY is almost here. Are you ready? Now’s the time to get your finances in order and maximise your tax return. Our latest guide covers top tax deductions, super contributions & co-contributions, SMSF must-dos, PAYG instalment tips and a 30 June checklist.

Maximise Your Rental Property Tax Deductions this EOFY

June 12, 2025
Whether you're a first-time landlord or managing multiple properties, understanding what you can claim at tax time can make a big difference to your bottom line. In our latest blog, we break down the most common (and often overlooked) deductions.
More Posts