Insurance premium set

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Saba'a

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Can someone please explain how a life and disability insurance premium is said to be set and not increase like normal insurance but yet it escalates every year still?
 
Hey? Do try and explain your issue in a more comprehensive fashion
 
Basically how does life or disability insurance differ ito level vs age related premiums. I understood that level premiums mean premium remains the same for life yet I notice premium increases albeit minor. Its stated to be inflation linked.

I am fine with it but this is not how its sold or was premium supposed to remain the same premium for life? Argument was that initially it is more expensive but later premium cheaper than age related insurance.
 
It really depends on the type of policy you have chosen. It sounds like you have not chosen a true fixed premium policy.
 
adielk said:
Basically how does life or disability insurance differ ito level vs age related premiums. I understood that level premiums mean premium remains the same for life yet I notice premium increases albeit minor. Its stated to be inflation linked.

I am fine with it but this is not how its sold or was premium supposed to remain the same premium for life? Argument was that initially it is more expensive but later premium cheaper than age related insurance.
Click to expand...

The first thing you need to remember is that nothing is for nothing.
Risk premiums have two parts - a compulsory increase and a voluntary increase.

Compulsory increase:

Every year that a person gets older, their chance if claiming increases (their risk profile increases) therefore to cater for this, their risk premium should increase. Now the difference between LEVEL and AGE RATED is as follows:

Level premium patterns pre fund your higher risk NOW for when you are older - hence the higher initial premium.
Ie if your benefit amount is fixed, your premiums will not increase.

Age rated on the other hand funds your risk as you get older, WHEN you get older hence the built in increases.
Ie, even when your benefit amount is fixed, your premium will increase.

None of the above actually increases your benefit amount - its all about risk.

Now, the voluntary increase buys you more benefit every year (remember, nothing is for nothing).
Your level premium pattern can have a voluntary increase - this ensures that your benefit amount keeps real value.

The nice thing about a voluntary increase, is that you can cancel it at any time - and your benefit amount remains constant.

Remember that premiums are only guaranteed for a certain period ie 10 years. This means that even though you may have chosen a level premium pattern, the insurance company has the right to increase your premium after the guarantee term is up. This shouldn't happen, but it can. (this would be due to bad assumptions, bad claims experiences etc)
 
Thats the point. From articles it seems there is no such thing. Level premiums have increases based on either a fixed percentage or inflation. Others remain without an increase but then the cover decreases (good for insurance taken to pay off bond to protect family)
 
Thanks @gazzak.
Think mine is voluntary increase and yes I think cover adjusts if premium increased BUT need to confirm this.
Was under impression premium is level but of course insured amounts would be level and become meaningless ito inflation.
 
adielk said:
Thanks @gazzak.
Think mine is voluntary increase and yes I think cover adjusts if premium increased BUT need to confirm this.
Was under impression premium is level but of course insured amounts would be level and become meaningless ito inflation.
Click to expand...

Just have a look at a statement - if it says your premium pattern is level, then the increases are definitely just being used to purchase more cover.

Another rule is that cover always costs more than premium. If your premium increases by say 5%, depending on your age, your cover will increase by less than that like 4%.
 
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