What's the difference between stepped and level premiums?

Australian life insurance policies offer two main premium structures: stepped and level premiums. Stepped premiums (also called age-based premiums) start lower when you're younger but increase each year as you age and your risk of death increases. For example, a 30-year-old might pay $40 monthly initially, but this could rise to $80 by age 40 and $200 by age 50. Stepped premiums are calculated annually based on your current age. Level premiums start higher initially but remain relatively stable over the life of the policy, with increases only due to inflation (CPI) or claims experience, not your increasing age. The same 30-year-old might pay $70 monthly for level premiums, which would only increase to perhaps $90 by age 50 (CPI adjusted). For younger Australians planning to keep insurance long-term (20+ years), level premiums typically provide better value and predictability, though they cost more upfront. Stepped premiums suit those wanting lower initial costs or planning short-term coverage (5-10 years). Most Australian financial advisers recommend level premiums for those under 40 buying long-term protection, as the total premiums paid over 30 years are usually significantly lower. However, if you're over 50 or only need temporary coverage, stepped premiums might be more economical. Some insurers allow you to switch between structures, but this typically requires re-underwriting.