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Stepped premiums vs level premiums

Stepped premiums increase as you age, level premiums don’t — but the latter is pricier to start with.

When you take out life insurance, you'll often be given a choice between stepped premiums and level premiums. Since level premiums never increase, they're usually better over the long run — you don't need to worry about them going up. Stepped premiums, on the other hand, often work better over the short term because they won't increase that much.

Stepped vs level premiums: What's the difference?


Stepped premiums

Stepped premiums will generally increase with your age e.g. every year at the "policy anniversary" your premium is re-calculated.


Level premiums

Level premiums will remain the same despite your age e.g. you'll usually pay more in the beginning but it will even out over time.

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Stepped vs level premiums cost difference

Here's a side by side example of a hypothetical stepped v level annual premium over 10 years. As you can see, stepped premiums generally start out cheaper but in the long run, it's likely to cost you more.

AgeStepped premium Level premium
10 year average$207.13$200.00
Total premium to age 40$2,071.28$2,000.00

Stepped level premiums are based on a sample profile from NobleOak Premium Direct Life Insurance in February 2019. Level premium is made up for illustrative purposes.

Stepped premiums pros and cons

Stepped premiums increase over time as you age. The older you are, the more likely that your health may deteriorate and therefore, your premiums (under stepped structure) will increase significantly, especially once you're older than 50 years.


  • Cheaper when you first take out a policy.
  • Good for people who don't want life insurance long term.


  • It usually costs more long-term.
  • It can become unaffordable as you get older.

Level premiums pros and cons

Level premiums don't increase as you age. Instead, your rates will be calculated based on your age at the time of application and locked in at a fixed rate for the duration of your policy.


  • It's usually cheaper long-term.
  • Good if you want long-term security.
  • It's easier to budget for.


  • It's more expensive at first.
  • Premiums can still increase slightly due to inflation rate, Consumer Price Index (CPI) and increase in policy fees.

The key differences between stepped and level premiums

Key differencesStepped premiumsLevel premiums
Do payments increase?Yes. Premiums are reviewed and calculated on a yearly basis on every policy anniversary.No. Premium rates remain the same, with a small increase each year due to indexation to keep up with inflation (usually around 5% or higher than the CPI).
Is it more expensive as I get older?Yes. Your premiums will increase significantly once your reach age 50 and over.No. Your premiums stay the same no matter your health or age.
Who is it suitable for?Those who have limited disposable income and are looking to secure short-term life insurance cover.Those looking to secure long-term life insurance cover.

What about hybrid premiums?

Hybrid premiums are the middle point between stepped and level premiums.

Hybrid premiums cost more at the beginning of the policy than stepped but lower than level premiums. Premiums increase until the policy reaches a predetermined age when the premiums level off.

Once this happens the premiums are higher than level but are lower than stepped.

Compare life insurance policies below

Name Product Maximum Cover Maximum Entry Age Terminal Illness Benefit Claims Acceptance Rate Average Claim Time Sum Insured
NobleOak Life Insurance
1.1 months
$24,483 million
Our verdict: Finder Life Insurance Award winner for the last 5 years in a row. Good value for money, simple application process and a high claims acceptance rate.

⭐ Current offer: Get one month free for a limited time - apply by 21 December 2023. Offer T&Cs on insurer website apply.
TAL Accelerated Protection Life Insurance
No set limit
Not stated
Data not available
1 months
$249,285 million
Our verdict: One of Australia's leading life insurers. Automatically includes child critical illness cover. Plus, it comes with a level premium option (e.g. costs remain similar as you get older).

⭐ Current offer: Get up to 15% off your TAL Life, Trauma or TPD insurance policy for life - if you have a Body Mass Index (BMI) between 19 and 28 at the time of your application. Offer T&Cs on insurer website apply.
Medibank Life Insurance
Data not available
Data not available
Data not available
Our verdict: Medibank offers a higher payout limit ($2.5 million) than 15 other providers. Get a 10% discount if you're already a Medibank Health Insurance member.
ahm Life Insurance
Data not available
Data not available
Data not available
Our verdict: ahm offers a simple application process. You can be approved online or over the phone. There are no medical or blood tests required.
HCF Life Protect Insurance
Data not available
Data not available
Data not available
Our verdict: Similar cover to other insurers ($1.5 million). A good discount for HCF members of 10% and an easy initial quote process.

⭐ Current offer: Eligible HCF Members receive 10% premium discount and HCF Thank You rewards.
RAC Life Insurance
1.1 months
$24,483 million
Our verdict: RAC’s maximum death cover limit of $25 million is one of the highest limits you’ll find, including $5 million in TPD insurance. You can get an online quote, but you’ll need to call RAC to get trauma cover. Benefit from added peace of mind with fully underwritten insurance.

Real Family Life Cover
2.4 months
$53,238 million
Our verdict: The application is simple; it can be done with 1 phone call and there are no medical exams. But households with larger debts may need more than a $1 million payout.

⭐ Current offer: Get back 10% of the premiums you’ve paid after 1 year.

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