Changes to your life insurance premium labels in 2024
Australia’s life insurance industry is getting a makeover when it comes to premium labels. If you've been paying attention to your life insurance policy terms, you might have noticed words like "Stepped" and "Level" popping up. By December 31, 2024, these labels are being redefined for new retail policies, and here’s why it matters for you.
The change, spearheaded by Council of Australian Life Insurers (CALI), aims to make premium types easier to understand for everyone. So, whether you're fresh to the life insurance game or have had cover for years, knowing how your premiums will change over time is key.
Here’s what you need to know about the premium update and how to make the most of your life insurance moving forward.
“The new terms aim to “better reflect how premiums change over time”, making the decision-making process less stressful for customers. ”
What’s changing and why?
Life insurance premiums fall into two main types: Stepped and Level. By the end of 2024, the industry will transition to new terms that reflect how your premiums actually change over time. These new terms will help customers make sense of their life insurance plans, ensuring they know exactly what to expect with rising costs.
The new labels for retail life insurance policies will look like this:
Source: Council of Australian Life Insurers | Life insurance premiums
Key differences between variable and fixed premiums
Stepped (now Variable Age-Stepped) premiums increase each year as you get older, and the chance of making a claim rises. This can be great when you're younger and looking for cheaper premiums upfront, but it could hit your wallet harder down the track.
On the other hand, Level (now Variable) premiums spread the cost of getting older over several years. This means while you start paying more, you’re locking in predictable premiums, saving yourself a financial headache in the long run.
What about my existing policy?
If you’re already a policyholder, your insurance terms remain the same. The only thing changing is the label. This means you won’t see any surprises or drastic adjustments unless you decide to take out a new policy after December 2024. For now, it’s all about making things clearer for future policyholders.
Making the most of your life insurance in 2024
If you're uncertain whether you're on the right plan or how these changes might affect your long-term financial security, having a chat with your adviser can provide clarity.
The updated terms might even inspire you to reconsider your current policy. Variable age-stepped premiums could be appealing for younger Aussies looking to lock in affordable options now, while those further along in life may prefer the stability of Variable premiums.
Again, speak with your financial adviser to ensure you’re getting the best value from your life insurance policy.