Life & Income
Guaranteed premiums cost more now and less later
The choice between guaranteed and reviewable pricing on protection cover is a bet about your own future, and one side of it is far harder to escape.
Everything below about guaranteed and reviewable premiums comes from what actually happens rather than from what is supposed to.
What holds up in practice
- Guaranteed premiums are fixed for the term; reviewable premiums can be re-rated periodically.
- Reviewable cover starts cheaper and can rise substantially at older ages.
- Switching after a health change is often impossible, which removes the escape route.
Two pricing structures
A guaranteed premium is fixed at outset for the whole term, regardless of your health or the insurer's claims experience. A reviewable premium is set for an initial period, commonly five years, then recalculated by the insurer.
Reviews are based on the insurer's claims experience for the whole book, not on your individual health. That distinction matters because a healthy policyholder cannot avoid a review increase by staying healthy.
Why reviewable starts cheaper
The insurer bears less long-term uncertainty when it can re-rate, so it charges less initially. Guaranteed pricing loads a margin for decades of unknown claims experience, which is why it costs more at the start.
The useful part is this: both are honest products, and the initial saving on reviewable cover is real. The question is only what happens at review, and that is unknown at purchase.
The trap is the exit
If a reviewable premium rises sharply, the obvious response is to switch to another insurer. That requires fresh underwriting, and any health change since the original application will affect the terms or availability.
The useful part is this: increases tend to arrive at older ages, which is exactly when health changes are most likely to have occurred. The escape route therefore tends to close at the moment it becomes necessary.
What happens if you cannot pay
Protection policies lapse when premiums stop, and there is generally no surrender value on term cover. Years of premiums produce nothing if the policy lapses before a claim, which is the nature of the product. That makes affordability across the whole term a genuine part of the decision rather than an afterthought.
Reducing the sum assured is usually possible and is better than lapsing entirely.
Where reviewable can make sense
Cover intended for a genuinely short period, or cover expected to be replaced by an employer scheme, carries less review risk. Where affordability now is the binding constraint, cover on reviewable terms is better than no cover. The mistake is choosing reviewable for a thirty-year need on the basis of the first year's price.
On an ordinary week, comparing the two on year-one premium alone is comparing the wrong number.
If that does not fit your week, it is not a failure of willpower.
Getting the comparison right
Ask for the guaranteed premium and the reviewable premium for identical cover, and note the review interval. Ask whether the insurer publishes its historic review outcomes, since some do.
In practice, because this is a long-horizon financial decision tied to your own circumstances, it is one to take through a regulated adviser. Nothing in a general article can tell you which structure suits your household.
The takeaway
Compare the guaranteed premium, not just the opening price. The cheap option is hardest to leave.
Pick the one that costs you least, and let the rest wait.
Questions readers ask
Can an insurer raise a guaranteed premium?
Not for the reasons a reviewable premium rises. Indexed policies increase by design as cover rises with inflation, which is different from a re-rating. Check which you hold.
How often are reviewable premiums reviewed?
Commonly every five years after an initial period, though intervals vary. The interval and the first review date should be stated in your documents.
