Do life insurance premiums increase with age? Stepped vs level premiums

What are stepped premiums and how do they work?

Stepped premiums, sometimes called rate-for-age premiums, are designed to change as you get older.

Stepped premiums are an attractive option because they usually have a lower starting cost than level premiums. However, it's important to consider how annual increases may affect your budget if you intend to keep your policy for many years.

Instead of paying the same amount throughout your policy, your premium is reviewed regularly and is usually updated each year.

Each review takes into account your age, the amount of cover, your smoking status, occupation, and any applicable discounts or premium loadings.

Because age is one of the factors used to calculate your premium, the amount you pay will generally increase over time. This reflects the stronger likelihood of making a claim further down the track - so while premium increases may be relatively small in your younger years, they often become more noticeable as you age.

Some life insurance policies move to stepped premiums after a level premium period ends, depending on the insurer and the terms of your policy.

Pros

• Lower premiums when you first take out your policy
• Can make it easier to fit life insurance into your budget
• May suit people who only expect to keep cover for a limited period
• You don't pay upfront for future age-related risk.

Cons

• Premiums are likely to increase over time
• Costs can rise significantly in later years
• Long-term insurance costs can be difficult to predict
• Keeping cover for decades may cost more overall than a level premium structure.

When stepped premiums may be worth exploring

Stepped premiums are a popular choice for people who prefer lower premiums when they first take out cover. You may like to learn more about them if:

• You want to keep your insurance costs lower in the short term
• You expect your need for life insurance to reduce over time, such as after paying off a mortgage or when your children become financially independent
• You're comparing different ways to balance your current budget with your future insurance costs
• You're comfortable with premiums that are likely to increase as you get older.

The most appropriate premium structure depends on your personal circumstances, financial goals, and how long you expect to keep your cover.

What are level premiums and how do they work?

Level premiums are designed to give you more certainty about what you'll pay for your life insurance. Instead of increasing every year as you age, your premium is generally set when you take out your policy and stays the same for a chosen period or until a selected age, such as 65, 80, or 100.

Because you're effectively fixing your premium earlier in life, level premiums usually cost more than stepped premiums at the beginning. However, the trade-off is that you're protected from the annual age-related premium increases that occur with stepped premiums.

Although they're called level premiums, this doesn't always mean your premium will never change. Your premium may go up if you increase your cover, add or remove benefits, choose inflation adjustments, or change how often you pay. Depending on the insurer, tax changes or other policy conditions may also affect your premium.

Some insurers offer the flexibility to convert from a stepped premium to a level premium structure - in certain cases, without providing new medical information, depending on the insurer.

Pros

• Premiums remain stable throughout the selected level premium period
• Easier to plan and budget for your insurance costs
• Helps reduce the impact of age-related premium increases while the level premium applies
• May work out to be more cost-effective over the long term if you keep your policy for many years.

Cons

• Higher premiums when you first take out cover
• May cost more overall if you only keep the policy for a relatively short time
• Certain policy changes can still affect your premium
• The level premium period has an end date.

When level premiums may be worth exploring

Some people prefer level premiums because they value certainty over future insurance costs. Level premiums are worth considering if you:

• expect to keep your cover for many years
• prefer more predictable insurance costs
• want to reduce the impact of age-related premium increases
• are comfortable paying a little more upfront in exchange for greater long-term stability.

Are level premiums fixed forever?

Not usually. Most level premium policies only keep your premiums fixed for the period you've selected. This may be until a particular age, such as 65 or 80, or for a specified number of years.

Once that period ends, your policy will generally follow one of two paths: your premiums may switch to stepped premiums, or you could opt to start a new level premium period, depending on the insurer and policy. The options available vary between insurers, so it's important to understand what happens before choosing your policy.

Sample fortnightly stepped and level premiums for $500,000 life cover

Note: These are sample quotes for male and female non-smokers who are under occupation class 1. Sample quotes generated in July 2026.

Can you switch premium structures?

Yes, it may be possible to change your premium structure after taking out your policy, depending on the insurer and their products.

Some insurers allow you to switch from stepped premiums to level premiums, from one level premium period to another, or in some cases from level premiums back to stepped premiums.

You may be asked to complete a new application, answer additional health questions, or go through underwriting before your insurer approves the change. Other insurers may allow certain premium conversions without new medical evidence.

If you switch to level premiums, your new premium will usually be based on your age at the time of the switch, rather than the age when you originally took out your policy. This means that waiting longer to change premium structures can result in a higher level premium.

If you want to switch premium structure, contact the insurer or your Policywise adviser (in writing) to request a change. They will confirm what is permitted, if underwriting is required, and what the premium will be set to at your age/time of switch.

Can you have a mix of both stepped and level premiums?

Yes. Choosing stepped or level premiums doesn't always have to be one or another decision. Depending on the insurer and the type of cover, you may be able to use different premium structures for different benefits within the same policy.

For example, you could choose level premiums for your life insurance while using stepped premiums for trauma insurance or income protection. This allows each benefit to have its own premium structure based on the options available under your policy.

Some people use this approach when comparing different ways to manage their insurance costs over time. Rather than applying the same premium structure to every benefit, they look at each type of cover individually.

In most cases, you can't apply both stepped and level premiums to the same benefit amount. If you want to change the premium structure after your policy starts, the options available will depend on your insurer's rules and your policy terms.

What else can affect your life insurance premium?

Your premium isn't based on your age alone. Insurers look at several factors when calculating the cost of your cover, both when you first apply and, for some premium structures, throughout the life of your policy.

Some of the main factors include:

The amount of cover you choose

Generally, the more you're insured for, the more you'll pay in premiums. Adding optional benefits, such as trauma insurance or total and permanent disablement (TPD) cover, can also increase the overall cost of your policy.

Whether you smoke or vape

Smoking and vaping are noted by most insurers because they're linked to higher health risks. If you've successfully quit, some insurers may allow you to apply for a reassessment after you've been nicotine-free for a specified period.

Changes you make to your policy

Your premium may increase if you choose to increase your sum insured, add extra benefits or link your cover to inflation. Depending on your policy, other changes may also affect how your premium is calculated.

Your personal circumstances

Insurers also consider factors such as your health, medical history, occupation, and some higher-risk hobbies or activities. These factors help insurers assess the level of risk associated with providing your cover.

Because each insurer assesses risk differently, premiums can vary even for people with similar circumstances. Comparing policies helps you understand the options available and what you're paying for. Policywise can make this task easier for you, completely free of charge.

How to manage life insurance premium increases

A premium increase doesn't always mean you need to make an immediate change. Before adjusting or cancelling your policy, it's worth taking the time to understand why your premium has increased and what the options are.

Before making any decisions, think about:

… whether your cover still reflects your needs

Life changes over time, and your insurance should too. If you've paid off debt, built up savings or your financial responsibilities have changed, it may be a good time to review whether your current level of cover is still appropriate.

… what has caused the increase

Premium increases aren't always caused by age alone. They may also be linked to changes in your cover, inflation adjustments, or the premium structure you've chosen. Understanding the reason can help you identify the next step.

… your options

Depending on your policy, you may be able to review your premium structure, adjust your cover, or compare policies from other insurers. Looking at the full picture can help you decide whether making a change is worthwhile.

… speaking with an independent adviser before making changes

Before reducing or cancelling your cover, it's important to understand how the change could affect your financial protection. Avoid cancelling your existing policy until a replacement cover has been accepted and is in place.

An independent life insurance adviser or broker from Policywise can compare policies from multiple insurers, explain the differences between premium structures, and help you weigh the advantages and trade-offs of each option based on your goals, budget, and circumstances.

Compare stepped and level premiums with confidence

Policywise is a 100% free service which tells you which life insurance premium best fits your needs. We offer fast, comprehensive, and easy-to-understand comparisons of all leading providers and a simple summary clearly recommending which insurer is best for your situation.

Not all insurance policies are the same. Policywise can help you sort out the duds, avoid the lemons, understand the fine print and exclusions, and get the right insurance for you and your family.

We make the important decision of where to buy your insurance super easy. We’ll answer your questions, provide experienced advice and quotes, and manage all the back and forth throughout the application process. Taking out your cover through us means you'll have our lifetime support and claims advocacy, and we'll help you negotiate a positive outcome at claim time. We can also take care of lodging any claims on your behalf and back you up if the going gets tough.

Check out the reviews on our homepage for how other New Zealanders have found our service, because now is the time to get your life cover sorted. Give your family or someone you love the most outstanding financial support possible. Book a 5-minute callback with Policywise today; our service is fast and free.

FAQs

Do life insurance premiums go up every year?

It depends on the premium structure you've chosen. If you have stepped premiums (rate-for-age), your premiums are generally recalculated each year and usually increase as you get older. If you have level premiums, your premiums are designed to stay the same for the selected level premium period, although they may still change if you increase your cover, choose inflation-linked increases, or make certain changes to your policy.

Why does life insurance become more expensive as you get older?

Life insurance generally becomes more expensive as you get older because the likelihood of making a claim increases over time. Insurers use this and other factors, such as your health, smoking or vaping status, occupation, and the amount of cover you choose, when calculating your premiums.

If you have stepped premiums, age-related changes are reflected in your premium each year. Level premiums help reduce the impact of these annual age-related increases during the selected level premium period.