If you’re looking at an insurance policy, particularly one regarding life insurance or pensions, you will likely have come across the terms “reviewable”, “age costed”, and “level” or “guaranteed level”. But what do they actually mean? Understanding the difference between these policies is key to deciding which is going to be the best for you.
What is a reviewable premium?
A reviewable premium is one where the insurance provider will periodically review the terms of your cover and alter them accordingly. For many insurers this will be done around every five years, but there are insurers that will review your cover on an annual basis. You have no control over the changes they decide to make to your policy.
What is an age costed premium?
With an age costed premium your premiums will scale the older you get and the closer you get to the date of the policy cut off. So, for example, generally the premiums will increase, often quite considerably, as you move through your 50s and 60s, and become more liable to claim. The increase will be consistent and established well ahead of time.
What is a guaranteed level premium?
A guaranteed level premium is one where your premium payments are guaranteed not to change through the life of the policy, but in many cases the policy benefits will continue to grow over time. This means your policy will not be reviewed and altered; your first payment into the policy will be the exact same as your last payment into the policy.
Which is going to be best for you?
Everyone is different and has different needs, requirements, and preferences when it comes to their policy. For many people, however, a guaranteed level policy is going to be the preferential option when choosing their policy terms. This is for the obvious reason that your policy payments are never going to change, which makes budgeting around them easier.
It also gives you peace of mind, because you know that as you go through life and your circumstances change for the better or worse, you will still know exactly what your policy payments will be. You won’t have to worry about your payments automatically scaling up, as they will with age costed premiums, nor reviewed and revised upward, as with reviewable premiums.
For more advice on this very topic, contact the experts at Sims Financial Services today.
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The information contained within was correct at the time of publication but is subject to change.