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5 Surprising Factors that Affect Life Insurance Costs

5 Surprising Factors that Affect Life Insurance Costs
Megan Fraser Updated: 19 March 2021
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If you’re like many other Australians, you may not have applied for life cover yet as you believe that it’s too expensive. Or, it may seem like an unnecessary expense, as you’re unlikely ever to see any real return on that monthly expense. However, the truth is that providing your loved ones with adequate financial support when you’re no longer around is one of the wisest decisions you’ll ever make.

5 Factors you control when it comes to the cost of your life insurance

Lazy Tax: Insurers are often focused on providing the best deals to new customers. Therefore, older legacy policies are generally more expensive than new ones. It’s typically a good idea to shop around for the best deal every 12 months.


Your level of cover: Most people aren’t aware that there may be specific built-in benefits on your policy, making it more expensive. It’s typically a good idea to review your level of cover periodically. This way, you won’t end up paying for what you don’t need. For example, too much cover


Type of cover: Make sure you are covered for the right things. Look for cover that is right for your current phase of life. For example, having life cover if you have younger kids or have just started a business.


When you pay premiums: You may be surprised to discover that you could be paying more for your cover than necessary. If you pay yearly, you could potentially save 6-9% on your premiums.


Engaging in health programmes: Certain insurers offer their members the opportunity to earn discounts by participating in the reward programmes. You may be able to reduce your premiums substantially just by taking part.

If you’d like to take control of your finances, and find the best life insurance policy for your requirements, complete the quote form below. Alternatively, you can contact us directly on 1300 743 254 to speak with a specialist.

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How much life cover do you need?

Typically, the amount of life cover you need will differ according to your unique circumstances. You’ll need to look at your financial responsibilities (like your mortgage and debt), how much money your family needs to maintain their current quality of life and future expenses like your kid’s university education.

Quick tips for calculating the amount of cover you need

For a broad estimate of the amount of cover, you’ll need to apply for you can generally do the following calculation:

Outstanding debt plus the cost of your financial obligations for the foreseeable future minus the value of your current assets, which you’d be willing to sell.

After this calculation, the number you are left with is typically the amount of cover you’ll need to apply for. However, it’s crucial to examine your current phase of life and think about any possible events which you’d like cover for before deciding on the right amount of coverage for your requirements.

Other factors that influence life insurance costs

1. Your age

With life insurance, you’ll typically pay less on premiums if you’re younger. This is because you’ll generally be healthier and more active and won’t be as likely to claim. As you age, it generally becomes more expensive to apply for cover as your likelihood of claiming increases.

2. Lifestyle choices

When you apply for life cover, most insurers ask about your health and lifestyle. They’ll want to know whether you smoke or drink and they might calculate your BMI. This information will help them assess your risks as all of these lifestyle choices increase your risks for heart disease, strokes and cancer. If you’re a smoker, you’ll generally pay more for your life cover than non-smokers.

3. Your hobbies

If you enjoy skydiving, caving, or rock climbing you may pay more for your life insurance than your friend who prefers to spend their free time playing a round of golf. This is because extreme sports are typically rated as high-risk. So, you may pay a higher premium for your cover, or there may be some exclusions on your policy. Remember to disclose this information to your insurer as each company has different guidelines regarding high-risk hobbies.

4. Family history

What does coronary heart disease and breast cancer have in common? They both have a hereditary component. If you have a family history with certain conditions commonly occurring in your relatives, your insurer will consider this when they calculate your overall risk. If you find yourself in this situation, you may be asked to go for a medical exam, and your insurer may add a loading or exclusion to your policy. However, this typically varies according to your insurer and the underwriting guidelines they adhere to.

How to choose life cover that suits your budget

The best way to choose a life insurance policy that suits your budget is to compare quotes from several leading brands. You can do that by filling in the quote form above or by calling us on 1300 743 254 and speaking with a specialist.

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7 Tricks that’ll keep your premiums within your means

  • Opt for level premiums: This premium structure may appear more expensive at first glance, but it’s cheaper in the long run as your premiums won’t increase due to a change in your age every year.
  • Change your lifestyle: If you stop smoking, lose some weight and switch out your extreme hobbies for a safer pastime, you may be able to get your life cover premiums at a more affordable rate.
  • Don’t include any extras: Make sure that your cover is relevant to your current circumstances so that you aren’t paying for any options that don’t suit your life right now.
  • Ask for a discount: Certain insurance companies offer discounts if you buy multiple types of cover at once, for instance, if you buy income protection and life cover at the same time.
  • Find an insurer who has removed fees: Insurers like MLC Insurance and ClearView Life Solutions have removed policy fees from their premiums, so you won’t need to pay as much every month.
  • Pay annually: If you pay your life cover premiums once a year, you may save between 6% and 9%.
  • Healthy Lives Discounts: Many insurers offer their members the opportunity to earn discounts and several other rewards just by taking part in their healthy lives programmes. However, the discount you’ll receive is typically determined by your insurer so, it’s best to check with them first.

Frequently asked questions and answers

  • How do you calculate life insurance premiums?

    There are a few different ways to determine how much life cover you need. You could use an online life insurance calculator. Or you could look at your debt, projected financial requirements and the assets you have to determine how much cover your family would need to maintain their current lifestyle.
  • How long do you have to pay life insurance premiums?

    Typically, you’ll need to pay your life insurance premiums to keep your policy in force. If you stop paying your premiums, your policy will generally lapse. However, if you are unable to pay your premiums but you’d like to keep your cover, you may be able to speak with your insurer about a premium holiday.
  • Can a life insurance policy be paid in full?

    No, your monthly premiums keep your policy in force, so you typically won’t be able to pay for your life cover in full. For instance, if the total premiums you have paid over several years amount to your total cover amount and you decide to stop paying your premiums, your policy will lapse.
  • Is it best to opt for the cheapest life insurance option?

    The cheapest policy is not always best, as it may exclude certain benefits that you need in your circumstances. Try to find something that fits your budget but still provides enough coverage for your most essential needs.

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