Aged Based Vs Level Based Premiums: Which is best for you?

Smart Family Life Insurance

Everyone’s needs are different when it comes to choosing a suitable life insurance policy, and here at Smart Insurance, we understand the importance of flexibility.


That’s why we offer a chance to organise your premium in a way that works for you and your lifestyle.


The basic features are the same - as long as you’re a UK resident and you’re aged at least 18 and under 65, you can apply for cover ranging from £60,000 up to £750,000.


You choose your benefit based on the maximum amount available for your age (the earlier you start, the more you can put in place).


You can even add on optional extras according to your needs. So if you have young children, you might want to think about optional Children’s Cover.


Or if you want to cover other scenarios, you can add on optional Critical Illness Cover or Accidental Death Cover. It’s always up to you, we’re just here to make it as easy as possible.


Choose your preferred premium option


Once you’ve decided on what kind of benefit you need for your family, all you have to do is decide what structure you want to use to pay your premiums. We’ve got two to choose from; a level-based policy and an age-based policy.


Why a Level-based policy works for you


With a Level-based policy, everything stays the same for the lifetime of the policy. You choose your benefit amount and how many years you want it to run for, and the corresponding premium stays exactly the same each month.


If you like certainty and consistency, this one’s for you. You pick the premium you can afford and it will only change if you choose to increase or decrease your benefit amount.


When you might not want a Level-based policy


Yes, your benefit amount will stay the same, but none of us knows what the price of a funeral, mortgage or loan will be in 20, 30 or 40 years' time.


Because the Level-based policy won’t necessarily keep pace with rising costs, there’s no guarantee that your benefit amount will have the same buying power in the future.


Also, bear in mind that this is a fixed-term policy with no cash-in value. Once your term ends, so does your cover.

Why the Age-based policy works for you

With our Age-based policy, the premium and benefit are recalculated each year to help keep pace with inflation.


The benefit amount increases by 5% on the anniversary of your policy for the first 10 years. But not to worry, we'll send you a new schedule each year telling you how this affects your premium.


If you’re on a tight budget, you’ll find this policy is cheaper to cover in the beginning, but you’ll have a bigger pot at the end of 10 consecutive years.


Unlike the Level-based policy, you keep the policy for the rest of your life, so you don’t have to settle on a fixed term in advance.


When you might not want an Age-based policy


If you think your expenses are unlikely to change in the future, you might not need a policy that increases in benefit (with annual premium increases).


Of course, you can opt out of your 5% benefit amount increases at any time and your premiums will then only increase each year in-line with age. You can even opt out, then opt back in again if you change your mind. We told you it was flexible!


Case studies


Let’s imagine the example of 'Conrad'. He’s 55, the mortgage is paid, and the children have left home. He just wants to make sure that his wife 'Barbara' is not left with the cost of a funeral (along with a few other expenses) when he dies.


Conrad wants a policy that pays a £200,000 benefit when he dies, and he wants to set it up and ‘forget about it’. A Level-based policy for 40 years might be suitable for him.


Now let’s imagine the example of 'Jackie'. She’s 33 and is expecting a first child with 'Sebastian'. Since she’s going to be taking a few years out from her high-flying career, she wants to start slow and top up when she gets back to work later.


Jackie estimates that £100,000 benefit will pay off what’s left of the mortgage if she were to die. With an Age-based policy, that benefit will have risen to £150,000 by the time Jackie is 43, and she can add on extra Accident or Critical Illness cover too at any point.


Undecided? Our friendly customer service team are ready to talk you through your options based on your particular circumstances now, not to mention how your cover might change depending on your plans for the future.