As someone who is looking to buy life insurance it is extremely important to understand premium payment patterns as it not only affects the increases you can expect your premiums to rise every year by, but it also affects the price of the premium you start paying. 

Generally speaking, most life insurance companies have three types of premium payment patterns. Although they may call them by different names they are all relatively the same. These include: 

1. Fixed/level premium pattern
2. Age rated premium pattern
3. Aggressive premium pattern 

The easiest way to explain these different types of premium patterns is to compare the relationship between the initial premium you are quoted and the expected increases you will have during the duration of the policy. 

Fixed/level premium pattern: 

A fixed or level premium pattern’s premium will either stay the same through the duration of the policy or increase by a fixed amount every year for the duration of the premium. When quoted using this premium the initial premium will be more expensive when compared to the other two premium patterns. However, over the long term this premium pattern will become cheaper as the premium increases will be lower every year. 

Age rated premium pattern: 

An age rated premium pattern is generally the preferred pattern for the majority of clients. It is linked to your age so every time you turn a year older the policy increases. This premium patten starts off cheaper than a fixed/level premium pattern but then gets more expensive over the duration of the policy. 

Aggressive premium pattern: 

This premium pattern starts off the cheapest but over time it becomes the most expensive. This premium pattern is normally chosen for life cover that is needed for a short finite period of time. An example would be cover for a buy and sell agreement for a business. 

Below is an illustration which best shows how the premium patterns would perform over the duration of a policy.