Stepped vs level premiums: what your policy costs you by age 65

Two insurance quotes land in your inbox. One is cheaper this month. The other costs more, but offers a level premium. Which is better value? The first payment cannot answer that question. You need to look at how long you need the cover, what you will pay along the way, and what happens when the level period ends.

Our earlier birthday-premium article explained why premiums can rise. This guide takes the next step: how to compare the total cost from now until your 65th birthday. There is no universal dollar figure or guaranteed saving — your own policy and insurer illustrations are the starting point.

Stepped: lower at the start, reviewed as you age

Stepped premiums are also called age-rated or rate-for-age premiums. They are recalculated at policy anniversaries using your age and the insurer’s applicable rates. Fidelity Life explains that age-rated premiums start lower than level premiums in its example, then increase as the insured person gets older. That is a pricing pattern, not a promise about every quote.

Age is not the only possible reason for a higher renewal. Increases in the amount insured, changes to underlying rates, policy fees and changes to discounts can also affect the bill, depending on your contract. Do not assume a fixed annual percentage increase applies to your policy.

Level: check exactly what stays level

A level premium structure is designed to remove age-related increases for the selected period, for the cover covered by that arrangement. It often costs more initially than stepped cover. The important words are “selected period”: level to age 65 is not the same as level for life.

“Level cover” and “level premium” are also different. Level cover describes an amount insured that does not automatically increase; it does not, by itself, mean the premium is fixed.

Guarantees differ by insurer and benefit. For example, AIA Living’s umbrella wording allows underlying rate changes on some level-premium benefits, while guaranteeing underlying rates for Life Cover, Family Protection and Accidental Death, subject to relevant taxation or legislation changes. Its wording also allows CPI-linked cover increases and changes to eligible discounts to affect premiums. Check the wording that applies to your own policy, not just the label on a quote.

The age-65 comparison: add the payments, not just the final premium

Ask for two comparisons: the annual premium at selected future ages, and the cumulative premiums paid from now until age 65. These answer different questions. A level option can become cheaper in a particular year while still having cost more overall because of its higher earlier payments.

• Set the same starting age, cover amount, benefits, exclusions and end date for both options.
• Use the same inflation setting. Comparing fixed cover with increasing cover does not compare the same protection.
• Include policy fees and use the same payment frequency. Identify any discounts and when they can change or end.
• Ask for each year’s premium and a running total, with guaranteed amounts clearly distinguished from projections.
• Compare what happens if you keep the cover to age 65, and if you stop earlier because your need has ended.

For a simple arithmetic example only, imagine starting on your 40th birthday and paying a genuinely unchanged total of NZ$200 a month until immediately before your 65th birthday. That is 25 years × 12 months × NZ$200 = NZ$60,000. This is a hypothetical illustration, not an insurer quote, a typical price, or an estimate for any amount of cover. It assumes no fee, discount, cover or premium changes.

For the stepped option, add the actual annual amounts in the insurer’s illustration over the same 25-year period. A single starting premium is not enough to calculate that total. We have deliberately not invented future stepped rates or a savings percentage. Unless a rate is guaranteed, an illustration based on current rates is not a promise of what you will pay.

Two break-even points — and why they matter

• Annual break-even: the point where the annual stepped premium reaches or exceeds the annual level premium.
• Cumulative break-even: the point where the total paid on stepped cover reaches or exceeds the total paid on level cover. This can happen later, or not within your intended cover period.

There is no single break-even age that applies to everyone. Your starting age, premium rates, benefits, cover amount and how long you keep the policy all affect the result. A simple total also ignores the time value of money: paying more now is not economically identical to paying more years later. Ask for that distinction to be explained if it matters to your decision.

What happens at 65? Read that line before you sign

An end to the level-premium period does not necessarily mean an end to cover. For example, AIA Living’s umbrella wording says that, at the end of its selected level period, the premium type converts to Rate for Age. Other products and benefits can work differently. Ask what your premium becomes, whether the benefit continues, and whether any separate benefit expiry applies.

Age 65 is a comparison point, not a rule that everyone should cancel insurance then. A mortgage, dependants or other commitments may continue beyond it. Equally, cover bought for a need that ends earlier should be assessed over that shorter period. This guide focuses on life-cover premium comparisons; do not assume private health, trauma or income protection has identical guarantees or expiry rules.

When each structure may make sense

Stepped cover may suit a shorter-term need or a budget that cannot comfortably support a higher initial premium. Level cover may suit a lasting need when its early cost is affordable and its guarantees match your plans. A combination may also be worth discussing — longer-term protection on level premiums, with temporary needs on stepped premiums, where available. Neither structure is automatically the right answer.

Keeping a fixed sum insured also has a trade-off: inflation can reduce its purchasing power. Choosing inflation-linked increases helps address that, but can increase premiums, including under a level structure. Compare both cost and the protection the money buys.

Do not trade good cover for a cheaper headline

Changing insurers can involve a fresh assessment of your health and other risks, with different terms, exclusions or premium loadings. Ask whether a change within your current policy is available and what conditions apply. Never cancel existing cover until any replacement has been accepted, its terms confirmed in writing, and its start date checked to avoid a gap.

Send Eduard du Toit your latest policy schedule and renewal notice, or book a free consultation with MFSS. Ask for a like-for-like comparison to age 65, a clear explanation of the guarantees, and a check that you still need the cover. The goal is not simply the lowest first payment — it is protection you can afford to keep for as long as you need it.

Sources and fact check

Checked on 16 November 2026 (New Zealand time). The pricing principles above were checked against insurer explanations and policy wording. These sources explain structures; they do not provide a personalised quote. Your policy schedule and the wording for your policy version govern your cover.

Fidelity Life — “Why do you get life insurance premium increases?”: https://www.fidelitylife.co.nz/insurance-101/life-insurance-basics/why-do-you-get-life-insurance-premium-increases/

AIA — AIA Living Umbrella Policy Wording, version 8, effective 12 May 2026, section 4 (“Your premiums”): https://documents.aia.co.nz/aia-living-umbrella-policy-wording

AIA — “How CPI indexation may affect your AIA insurance cover”: https://www.aia.co.nz/en/help-support/consumers-price-index.html