The main difference between level and stepped premiums is the way in which the premium payments change over time.
A level premium is a premium that stays the same for the duration of the policy. This means that the premium amount you pay at the start of the policy is the same as the premium amount you pay at the end of the policy. This type of premium is often used for policies that have a long duration, such as life insurance.
Stepped premiums, on the other hand, increase over time. This means that the premium amount you pay at the start of the policy is lower than the premium amount you pay at the end of the policy. Stepped premiums are often used for policies that have a shorter duration, such as Income Protection policies.
Stepped premiums are usually cheaper to start with, but they can end up being more expensive than level premiums in the long run. This is because the premium payments increase as the policyholder gets older, which can make the policy less affordable as time goes on.
In general, level premiums are considered to be more predictable and stable, while stepped premiums can be more affordable in the short term but may be more expensive in the long term. It is important to carefully consider the pros and cons of both types of premiums and choose the one that best suits your budget and insurance needs.