What’s behind your life and health insurance premium increases?
We’re all fed up with the sharply increasing prices of petrol, food, household goods and services… right? The sharply increasing inflation rate is impacting on everything, including life and health insurance premiums. How so?
Why health insurance premiums increase is because the vast majority of insurance policies sold in New Zealand are based on ‘rate-for-age’ premiums, most of which have the sums insured CPI-indexed. With inflation now running at over 5%, this means that there will be a premium increase attributable to the CPI-indexed increase in the sum insured. However, you do have the option to waive this annual CPI increase in the sum insured, if you wish.
While rate-for-age premiums will always be the cheapest option at any given point in time, premiums will progressively increase in cost with increasing age at each successive policy anniversary. Premium increases are minimal in your 20s and 30s, but thereafter will progressively increase at a greater rate. Rate-for-age policies therefore allow you to insure a larger sum, as it is cheaper in one’s younger years, which often coincides with the time that many also carry the expenses of a young family and a mortgage.
Why does my insurance premium go up every year?
In addition to the increase in premiums resulting from CPI-indexation of the sum insured, there are some further elements that influence your annual rate-for-age premium increase:
- The annual rate-for-age premium increase, which increases each year, with your increasing age.
- Health insurance policies are also subject to the annual premium increase with increasing age. In addition, health policy premiums often increase at a greater rate than CPI as a result of the inflation in medical costs arising from increasingly expensive and sophisticated medical technology and treatments.
On top of the above elements, an increase in the underlying premium rates may also be infrequently applied by insurers, perhaps every 2-3 years, when influenced by industry claims experience for specific types of cover, clients or demographics.
Talk to us about life and health insurance quotes
If you have any questions as to why health insurance premiums increase, please get in touch. Also, if you wish to discuss your insurances, consider the benefits of the alternative premium options and understand how to optimise your protection plan, please feel free to contact us for a free, no-obligation consultation.
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