Understanding stepped premiums

There are a lot of components that go into determining what type of insurance policy you need and how much you’ll pay in premiums to maintain your cover. It can be a highly personalised process, and that can make it tricky to understand why you might be paying a different amount to someone else.

To help you understand what you’re paying and why, we’ve broken it down into three categories: your personal risk factors, the type of insurance you choose and your premium structure.

1. Personal risk factors

During the underwriting process, we assess your history and lifestyle against a range of factors to calculate the possibility that certain life events may happen to you. The higher your level of risk for these factors, the higher your premiums are likely to be.

Here are some of the personal risk factors that can influence your premiums:

• Age - some illnesses become more likely as you get older.
• Gender  - each gender has its own risk factors, so men and women generally pay different premiums.
• Occupation - for example, working in a mine carries more risk than working as a retail assistant.
• Health factors - a high Body Mass Index (BMI) can be an indicator of poor health.
• Dangerous hobbies - for example, sewing is less risky than skiing.
• Smoking - smoking increases your risk of illness and disease.
• Medical history - hereditary factors, or conditions developed in your lifetime, can increase your risk of becoming ill or injured later in life.

2. The type of insurance you choose

Your life insurance policy has been designed with a lot of different features that you can pick and choose from, so it fits your lifestyle and needs. Some of these features may increase the cost of your insurance:

• Types of cover
• The amount you’re insured for
• Premium frequency (i.e. monthly or annually)
• Waiting period before you can receive any benefits
• Annual indexation to keep up with inflation
   

3. Your premium structure

Everyone’s financial situation is different. That’s why Resolution Life offers different ways for you to pay your insurance premiums.

Stepped premiums

One way is to have your premiums stepped: in other words, reflecting your age and any risk factors that go every year at the anniversary of your insurance policy.

If you choose stepped premiums:

• Your premiums may be less expensive when your policy starts, compared to other options.
• The cost of your premiums will generally increase each year.
• Resolution Life can increase your premium if it re-prices the insurance product to ensure it can meet future claims from customers. You will be advised of this if it applies to your policy.