You may already know this: insurance premiums usually rise as you age. That’s because the likelihood of claiming on your life, health, income protection or trauma policy also increases. And a result, insurance may become less and less affordable just when you need it most.

Think of insurance affordability as a marathon. In a marathon, you don’t sprint all-out: you must sustain a pace to make it through. So, it’s crucial to ensure that your cover stays affordable for as long as you need it.

But how, you may ask? As you’ll see, there are options available, not all of which may be suitable for you. It’s one of those cases where seeking advice is invaluable: an insurance adviser can help you understand your options and, maybe, even find out-of-the-box solutions. Starting with…

Choosing the right premium type for your needs

As we said before, insurance premiums usually increase as you get older. Age is one of the factors that can influence your premiums, alongside your occupation, medical history, and more. Age-related premiums are also known as ‘stepped premiums’, and they are the most common way to structure personal insurance in New Zealand.

But they’re not the only way. An alternative option is to choose ‘level premiums’ instead.

Mostly available with life insurance policies, level premiums usually start a lot higher than stepped premiums, but they remain the same throughout the duration of your contract (unless you make changes to your cover). This means that, years down the line, there’s a point where level premiums start being more affordable than their stepped counterparts.

Who are level premiums for?

When it comes to structuring your insurance, everyone’s needs are different. But generally speaking, level premiums may be best suited for people who are looking for certainty of insurance costs, would like to keep the same level of cover in the long term, and can afford to pay higher premiums in meantime.

In the terms of age groups, usually your 30s and 40s are a good time to consider this option – but that’s not to say that you can’t consider it sooner or later than that.

On the other hand, if you’re looking for short-term affordability and/or you think your need for cover may change later in life (for example, because you’ll be paying down your mortgage, or your children will become independent), then stepped premiums may still be the most appropriate solution for you.

Once again, an insurance adviser can help you make this important decision with confidence, so don’t hesitate to seek assistance.

Are there any other ways to keep insurance affordable?

Yes, absolutely – locking in your premiums isn’t the only way to ensure the affordability of your cover.

As you progress through life, your insurance needs may change and possibly reduce. Repaying debt and becoming empty nesters are just two of the (many) things that can happen in your life, prompting the need for an insurance review.

This is another key area where an adviser can make a big difference, by recommending you ways to keep premiums as low as possible, without losing the protection you need. For example, if you have built a rainy-day fund, you may be able to increase the excess (and reduce your premiums). If you’ve left a risky occupation or habit, your adviser might prompt you to ask your insurance to review the conditions on your policy – and potentially save you money.

The list of tweaks you can make in due course is long. The bottom line is that insurance is not a one-time transaction. Rather than a product, insurance is a solution that, with some adjustments along the way, can evolve along with your needs and budget.

Need help?

One size doesn’t fit all, so we recommend speaking with an insurance adviser to get a clearer picture of what you may need. Here in New Zealand, there are hundreds of advisers committed to helping Kiwis protect their future.

Like to get the conversation started? Click here to find a financial adviser specialised in Personal Risk near you today.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.