Explore Life Insurance

Your life is priceless, but when it comes to your life insurance, it’s important to understand how your insurance costs (known as premiums) work and what you can do to reduce them. While a life insurance policy can be vital to protect your family should something happen to you, you shouldn’t have to break the bank for the peace of mind that you and your loved ones will be looked after if you couldn’t provide for them.

Determining the right level of life insurance coverage for you and your family is important, as there are many factors that affect how much you pay for life insurance. However, that doesn’t mean there’s nothing you can do to reduce your life insurance premiums.

Why you should consider a life insurance policy

It’s important to consider what would happen if something unfortunate were to happen that affected you or your family’s financial stability. If you’re not financially prepared for the worst, it might be time to learn about the types of life insurance, how much they cost and how the payouts work.

Term life insurance can pay out a set amount of money (depending on your policy’s cover amount) as a lump sum to your chosen beneficiaries. It’s designed to cover you and your family’s financial needs in the unfortunate event that you pass away or are diagnosed with a terminal illness.

Total and permanent disability (TPD) cover pays a lump sum if you’re unable to return to work and earn an income because you become seriously ill or permanently disabled. A trauma insurance benefit can help pay for medical bills and other expenses while you recover.

How you may be able to reduce your life insurance premiums

Life insurance doesn’t need to be expensive, and there are ways to reduce your life insurance premiums with a cost-effective policy while still covering the value of your life. Here are some tips on how you could reduce your life insurance premiums.

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1. Compare new life insurance policies

The first and possibly easiest way to reduce your premiums is to compare new life insurance policies with different cover options. Old and outdated policies may not provide great value for money with rates that are no longer competitive and cover that’s ineffective for your requirements.

If you’re looking for a new life insurance policy that covers your lifestyle, doesn’t blow the budget, offers great value and safeguards your future, shopping around and comparing policies is a smart way to reduce your life insurance premiums.

However, when comparing policies to try and reduce your life insurance premiums, you should consider each policy’s value for money rather than just its price, as each will have different benefits, conditions, features, loadings and exclusions. You can easily compare life insurance through our free comparison tool to see policies from some of Australia’s most trusted insurers and hopefully find a great value policy that suits your lifestyle and budget.

Get the right level of cover

Comparing policies from a range of life insurance companies with a variety of cover options may help you find a policy with lower premiums.

Comparing new policies will also allow you to remove any unnecessary cover and include features that are relevant to your needs, like cover for certain pre-existing conditions you may have. You should also check that your new policy includes enough money to cover you or your family’s expenses should the worst happen.

It’s important to consider how much life insurance you will need paid out in the event of a partner or parent’s death or the inability to work due to injury or sickness. The amount of money you, your partner or your family might require to get by in the future will depend on how much is needed for certain expenses like:

  • Living costs (e.g. food, household bills, home maintenance)
  • Credit card, mortgage and personal loan debts
  • Children’s education
  • Potential recovery and medical costs
  • Funeral costs.

Our life insurance calculator is an easy tool that can give you an idea of how much insurance you may want to consider to cover your family’s lifestyle if you can no longer provide for them.

Discounts are another thing you can take advantage of when comparing policies and finding the right level of cover. For example, life insurers will generally offer a discount if the premium is paid annually (instead of paying a monthly premium). Some insurers offer a sign-up discount off your premiums or a partial refund of your premiums paid within the first year. There are also some new life insurance policies that offer additional benefits like no lock-in contracts or easy and fast applications.

It’s also important to compare different policies for their features, like low annual premium fees, joint policy discounts, a variety of premium structure options (stepped, level or hybrid) and options for varying payment frequency to help manage premium payments.

Choose the right premium structure

With life insurance, you can usually choose between stepped and level premiums for your policy structure, either of which can help reduce your life insurance premium costs either in the short or long term depending on your circumstances. The right option for you will depend on where you are in life and your individual needs.

  • Stepped premiums may be cheaper to start off with when you’re younger and might save you money in the beginning. However, these premiums usually increase in price as you get older.
  • Level premiums don’t increase in price based on your age. This structure could cost more than stepped premiums initially but might save you money in the long term because your premium amount is calculated by the age you were when you purchased life insurance. While your premiums might remain more constant for the duration of the policy on this structure, they can still rise due to factors like CPI inflation, global premium rate increases or changes to the insurer’s fees.
  • Hybrid premiums cost somewhere in between and are a combination of both these premium options, with prices increasing until you reach a certain age where they level out (hybrid premiums are still subject to CPI inflation and increasing policy fees).

By regularly comparing your policy against others, keeping up to date with more affordable coverage with better features and choosing the right life insurance premium structure, you may find more value and reduce your life insurance premiums.

Opt out of Consumer Price Index (CPI) increases and indexing

Another way you could reduce your life insurance premiums is to opt out or remove the option of automatic CPI increases. Life policies are generally indexed for inflation, and policy indexation can impact your life insurance premiums; depending on your policy, the cost of your premiums (and your benefit amount) can increase annually by 3-5% or in accordance with the Indexation Factor for the year.

Removing CPI increases from your policy will avoid inflation and won’t increase the price you pay year on year. However, your benefit amount also won’t increase along with the inflation, and you may receive a lower life insurance payout than you could get with CPI increases included in your policy.

2. Modify your current life insurance policy

Life changes, so your life insurance policy should change with it. Unfortunately, some policies don’t update automatically with every little thing that changes in your life. If you’re not aware of your policy terms, you could be paying for features you don’t even need.

Reduce your sum insured (death benefit amount)

An option you might consider to reduce your life insurance premium is to reduce the amount you’re covered for through your policy, as you may not need as big of a lump sum payout as when you started your policy. It might not be cost-effective to be on a life insurance plan where you’re paying higher premiums to be covered for more than you may need. For example, covering your life for $3 million will significantly increase your premiums, but may not be entirely necessary if you think that half or even a third of that amount would be enough.

Common reasons people may reduce their cover amount to reduce their premiums include:

  • You might have fewer financial obligations than when you first purchased life insurance (e.g. your kids may be grown up now and are no longer financially dependent, and you may now have a smaller home that costs less to maintain).
  • You might need to update the beneficiaries of your policy (e.g. your beneficiaries may have originally included your children who might now be financially independent, or it may have included a partner that might no longer be around or in need of money from your life insurance policy).

Remove features from your cover

Removing some unnecessary features from your life insurance (like cover for certain illnesses or conditions that are unlikely to affect you) can reduce your life insurance premiums. However, your good health isn’t a given, so you don’t want to be underinsured or not covered at all by removing some of these medical conditions from your policy.

Combine life insurance with your superannuation

Sometimes you may find life insurance cover included in your superannuation. However, this can be very basic and limited in its coverage and there are various terms and conditions with this type of option.

Purchasing your life insurance through your superannuation fund will typically be cheaper and can reduce your overall life insurance premiums (which will be paid out of your superannuation balance rather than taxable income). However, this generally doesn’t offer comprehensive protection and might not provide adequate cover required to provide for your family or beneficiaries. This option will also impact your retirement savings, as your superannuation money will be used to pay your life insurance.

Opt for a medical check-up

Life insurance premiums will always be higher if you don’t prove how healthy you are. If you’ve signed up for a no medical policy, you may be paying more than you need to for coverage just for the comfort of not having to prove your health status. Going through the medical examinations or health checks as required by the life insurance provider or policy application process might save you more money in the long run, even if you aren’t the healthiest person.

3. Change your habits and lifestyle

Living a healthy and less risky lifestyle (and being able to prove it) can make a big difference to life insurance providers. Your current health and medical history can have a substantial effect on your life insurance premiums, as your insurers look at the potential risks each individual brings with them when calculating their premiums.

Quit smoking

Life insurance providers look more favourably on non-smokers and may even charge a smoker double the amount for the same policy as someone who doesn’t smoke. This is a great reason to quit smoking and reduce your life insurance premiums at the same time.

Can I lie to my life insurer about my smoker status to reduce my premiums?

Life insurance customers are bound by a duty of disclosure, which means you are obliged to tell your insurance provider of any changing lifestyle circumstances.

Non-smokers do get cheaper life insurance premiums because they are less of a risk, but once you apply for non-smoker life insurance cover, you may have to go 12 months without smoking to have your premiums lowered. So, make sure you let your insurer know if you have stopped smoking.

If your life insurance policy is classified as a non-smoker, but the insurer finds evidence via social media or otherwise that you are a smoker or have smoked even one cigarette, it could void your life insurance policy entirely.

Lose weight

Losing weight isn’t only great for your health, it’s also a helpful way to reduce your life insurance premiums. Being overweight presents a big risk to life insurance providers because it increases your chance of developing serious health conditions like diabetes, high blood pressure, high cholesterol, heart disease or a stroke.

Improving your lifestyle by losing weight can reduce your risk factors and your life insurance premiums. Some insurers even offer discounts on premiums for those who lead healthy lives or are within specific BMI ranges.

Drink less

Excessive alcohol consumption can be seen as a health risk by life insurance providers, and so they may not offer cover in this case. If they do offer cover, it might incur loading fees or increased premiums to make up for the increased risk. A good tip on how to reduce your life insurance premiums or reduce loading fees is to reduce or cut out alcohol consumption. If you can prove to your insurer that you’ve changed your drinking habits for the better, they may see you as less of a health risk.

Live safer

If you like to live life on the edge and get a thrill from extreme sports and risky hobbies, you may need to change your lifestyle if you want to reduce your life insurance premiums.

Some insurers may have exclusions or loadings on certain activities. This means that you could pay more for your life insurance premiums if you’re a daredevil and regularly engage in extreme activities like skydiving, skiing, motorsport or car racing, bungee jumping, mountain climbing, scuba diving or even jet skiing. Living a safer lifestyle reduces your risk to insurers and can reduce your life insurance premiums.

4. Get life insurance when you’re younger

According to a recent survey by the Australian Bureau of Statistics (ABS), a newborn girl in Australia will have a life expectancy of 85.3 years, while boys have a life expectancy of 81.2 years. 1 The closer you are to this life expectancy age when you purchase life insurance, the higher you can expect your premiums to be. This is because you will pay premiums to your insurer for fewer years before you’re paid out a death benefit.

Some people won’t consider purchasing life insurance when they’re younger because they see it as an unnecessary expense at that stage of their life. However, insurers may see younger customers as less risky and may offer a cheaper premium rate because of this. Despite being an additional expense, taking out life insurance at a younger age is a great way to reduce your life insurance premiums for your policy’s duration by securing a cheaper rate while you’re young.

Life is unpredictable, but your life insurance doesn’t have to be. To maximise the value of your life insurance, and reduce your life insurance premiums, follow these tips and don’t wait too long to purchase cover. Get the right life insurance policy for your lifestyle, budget and family’s needs before it’s too late.


1 Australian Bureau of Statistics – Life expectancy hits a new high. Published November 2021.

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