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

New Identity Verification Requirements: What Ascent Clients Need to Know.

July 13, 2026
From 1 July 2026, new AML laws require us to verify your identity before certain services. Here's what's changing, what we need, and what to expect.

Is Your TPAR Lodged? Don't Be Penalised This August.

July 13, 2026
Does your Perth business need to lodge a TPAR by 28 August 2026? Find out who must report, what to include, and how to lodge with confidence.

Don't Rush Your Tax Return. Here's Why It Pays to Wait.

July 13, 2026
Over 595,000 Australians had their tax returns adjusted last year from lodging too early. Find out what to check before you lodge your 2026 return.

June 30 Checklist for Business Owners

June 15, 2026
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 15, 2026
EOFY is almost here — are your finances ready? Our guide covers top deductions, super contributions, SMSF essentials and a 30 June checklist to help you maximise your return. Read it here.

Maximise Your Rental Property Tax Deductions this EOFY

June 12, 2026
Not sure what you can claim as a landlord this EOFY? From loan interest to depreciation, we break down the most common (and overlooked) rental property tax deductions. Read the full guide.
More Posts