When you purchase an individual disability policy, some companies offer a graded or level premium.

Level premiums are fixed and guaranteed for the full benefit period of a policy which is usually to age 65, 67 or 70. Graded premiums are initially less expensive and increase every year. The company provides a schedule showing the premium on an annual basis.

If you start with a level premium, you cannot later change to a graded premium. If you start with a graded premium, you may change to a level, fixed premium on any policy policy anniversary. The new level premium will be based on your attained age.

The breakeven point for a policy is around age 52. This means that if you intend to keep your policy past the age of 52, you will pay less premiums cumulatively with a level, fixed premium. If you intend to drop the policy prior to age 52, you will pay less if you have a graded policy.

Graded policies are beneficial for people who are on a tight budget but will have an increase in income in the future. A lot of medical residents choose a graded premium during medical residency and later switch to a level, fixed premium when their income is higher and they can afford the higher premium.

For more information about the difference between a graded or a level premium or to request a quote, contact Set for Life Insurance today!