Comparing premiums is difficult

There are some things you should understand about your life, disability and severe illness cover.

Life companies have different premium patterns or ways in which premiums increase on policies offering you cover for disability, death, severe illness and income protection. These premium patterns often make comparing initial premiums a futile exercise.

Cover can be level or increase to keep pace with inflation — if it increases, your premiums will increase too. That increase can be at a set rate or in line with your age — which is related to the risk of you dying, being disabled or contracting a severe illness.

If the premiums are set to increase with your age, you need to know how the assurer will apply those age-related increases and whether there are periods during which the premiums are guaranteed.

If your cover increases, your premiums increase by more. It is possible to get a fixed level of cover at a fixed premium, but then your cover level will decrease by inflation each year.

To keep your premiums low, especially when you are younger, life companies often give you the option of taking premiums that accelerate as you age. The policy will escalate at a low level in your younger years but the increases may become quite steep as you get older.

You need to consider how long you want to keep the policy, whether you want certainty about your premiums and the cover you need.