Explore Life Insurance

Your life is priceless, but in the event of something unfortunate happening you can try to put a price on it. Covering your life with insurance can be extremely valuable when those you leave behind may need it most. However, life insurance shouldn’t have to break the bank.

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, but that doesn’t mean you can’t reduce your life insurance premiums.
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Why you should consider a life insurance policy

Life can be tough, and it can also cost a lot. But what if something unfortunate were to happen that affected you or your family’s financial stability? It is imperative to understand the premium costs and benefits of life insurance, and how life insurance payouts work.

Life insurance pays a set amount of money (depending on your policy) as a lump sum to you or your loved ones (or chosen beneficiaries) when needed most. Life insurance is designed to cover your and your family’s financial needs in the unfortunate event that you pass away, or are diagnosed with a terminal illness.

Life insurance with total and permanent disability (TPD) cover pays a lump sum if you are unable to return to work and earn an income because you are seriously ill or injured, becoming permanently disabled. Trauma insurance pays a lump sum if you fall ill or are seriously injured, and can’t work or earn income for a period of time.

There are many reasons to consider life insurance. Its importance is highlighted in the latest underinsurance report from Lifewise/NATSEM in 2010:1

  • One in five Aussie families will be financially impacted by the death of a parent, or an accident or illness that renders a parent unable to work.
  • 18 Aussie families lose a working age parent every day, which is equivalent to around six and a half thousand families feeling the loss of a parent.
  • Over 200,000 working age parents suffer serious illnesses or injuries every year, forcing around 17,0000 of these parents to stop working for a period of time, some permanently.
  • Over 95% of Australians do not have sufficient levels of personal life insurance.

Investing in life insurance is much like saving money for a rainy day. Life insurance offers your family an umbrella for protection on what could be one of the rainiest days of their lives.

Tips on some of the best ways 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 tips on how to reduce your life insurance premiums.

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 is 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 beneficial way to reduce your life insurance premiums.

However, when comparing policies, quotes, and trying to reduce your life insurance premiums, you should factor in each policy’s value for money, rather than its price, as each will have different benefits, conditions, features, and exclusions. You can compare life insurance with ease through the Compare the Market website to find the one that gives you the most value and is the most suitable for your life and budget.

Get the right level of cover

Comparing life insurance policy quotes from a range of life insurance providers with flexible premiums and a variety of cover options may allow you to reduce your premium.

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 may wish to ensure that your new policy includes enough money to cover you or your family’s expenses should the worst take place.

It is important to consider how much life insurance you will need to be 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 be determined by how much is needed for certain expenses like:

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

Our life insurance calculator is an easy tool to calculate the total amount you of insurance you may need to cover your family’s lifestyle in the event the unexpected occurs.

According to a 2017 study conducted by the University of Melbourne, and based on the annual basic expenditure of a Victorian family of four (with two kids under 15), the average Aussie family conservatively needs at least $50,000 a year to cover basic living expenses.

ExpenseAnnual Cost
Food (excluding restaurants & takeaway)$8,745
Clothes/Shoes (children)$976
Housing (gas, water, electricity, repairs and maintenance, rates, mortgage)$30,392
Cleaning products/Personal hygiene/Haircuts$2,170
Car and Public Transport (registration, petrol)$4,972
Communication (budget internet/mobile/landline)$911
Government School (excluding sports)$341
Financial & Insurance services (home insurance, ambulance membership)$1,061
Source: University of Melbourne 2017 Housing Expenditure Analysis2

Life insurance funds will generally offer a premium discount if the premium is paid annually (instead of breaking up payments in monthly or weekly instalments). Some funds offer a 10% discount off your premiums (or a 10% refund off your premiums paid within the first year) when you sign up for life insurance. There are also some new life insurance policies that offer additional benefits like no-lock in contracts, or easy and fast applications.

It is also important to compare different policies for finding 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

Choosing the right premium structure for you, and comparing stepped and level premiums, can help reduce your life insurance premiums either in the short term or over the long term, and help find the one that is right for your budget.

  • 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 usually don’t increase in price with your age, and may cost more than stepped premiums, but might save you money in the long term because they are calculated by the age you are when you purchased life insurance and remain more constant for the duration of the policy (unless CPI inflation, global premium rate increases, or changers to insurer’s fees alter the price).
  • 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).

General trajectory of costs for different life insurance premium structures for 30-year-old consumer

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 suggestion on how to reduce your life insurance premiums is to opt out or remove the option of automatic CPI increases. 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. Life policies are generally indexed for inflation, and policy indexation can impact your life insurance premiums.

Removing CPI increases from your policy will avoid inflation and not increase the price you pay year upon year, thereby reducing your life insurance premiums. However, your benefit amount also won’t increase along with the inflation, and you may be receiving less in life insurance payouts than what you could be with CPI increases included in your policy.

2. Modify your current life insurance policy

Life changes all the time, and your life insurance policy should change with it. Unfortunately, some policies don’t update automatically with every little thing that changes in your life.

Reduce your sum insured (death benefit amount)

An option you may consider to reduce your life insurance premium is to reduce the amount you are covered for in your policy, as you may not need as big of a lump sum payout as initially thought. It might not be the most cost-effective plan to pay higher premiums to be covered for more than you may need. Covering your life for three million dollars will fundamentally increase your premiums, and may not be entirely necessary if you think that half, or even a third, of that amount would be enough.

Some of the reasons that you might decrease your coverage to reduce your premiums are:

  • you might have less financial obligations than when you first purchased life insurance (your kids may be grown up now and are no longer financially dependent, and you may now have a smaller home which costs less to maintain)
  • you might need to update the beneficiaries of your policy (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).

If you are going to reduce the amount you are covered for, it is always a great idea to compare different life insurance providers, as you might find a different fund that offers you coverage and benefits that better suits your needs.

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, and you don’t want to be underinsured, or worse, not covered in the event that death or illness is a result of one of these medical conditions or illnesses which has been excluded in your policy.

Lessen your benefit period

Another tip on how to reduce your life insurance premiums is to choose to have a shorter benefit payout period at the time of submitting your application. This applies more to income protection insurance which covers your income over a period of time when you can’t work due to illness or injury, rather than a lump sum for life insurance payouts.

Lessening your benefit period means that if you or your family were to make an income protection claim, you could have chosen in your original income protection application process to have it paid over two years instead of ten years. This will reduce your life insurance/income protection premiums because insurance providers don’t have to continually pay out your cover over an extended period of time.

How to reduce income protection premiums

There are many reasons to consider purchasing income protection. However, income protection premiums can also be influenced by a number of factors which can be altered to reduce premiums, including:

  • benefit amount (the amount of money you are covered for to protect your income),
  • benefit period (the period you are paid income protection over),
  • waiting period (minimum period you must not be able to work due to sickness or injury before income protection payments are paid),
  • Indemnity vs agreed income protection cover (insurer asks for proof of income vs you proving your own income when claiming).

Have a longer waiting period

If you or your family are not in a hurry for the benefits of life insurance to be paid out, or if you have enough money to get you by for a short period of time should the worst occur, then this is a great option for you.

Increasing your waiting period might mean that you or your beneficiaries have to wait a year instead of months, or three months instead of two weeks, to make a claim and receive a lump sum from your insurer. If you have the financial means to live from your savings for a period before receiving a payment, then this will help reduce your life insurance premium.

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 have 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) is a big thing for life insurance providers, and your health can affect your life insurance premiums. When calculating life insurance premiums, providers look at the potential risks each individual brings with them. Another tip on how to reduce your life insurance premiums is to change your lifestyle and become healthier.

FAQ: Can I lie to my life insurance provider about being a non-smoker to reduce my premiums?

Life insurance customers are bound by a duty of disclosure, which means you are obliged to tell your 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 wait 12 months without smoking to have your premiums lowered.

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

Quit smoking

Life insurance providers look more favourably upon non-smokers, and may 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.

Lose weight

Losing weight isn’t only great for your health and waistline; it’s also a helpful way to reduce your life insurance premiums. Being overweight and having an unhealthy body mass index (BMI) 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 strokes.

Improving your lifestyle by losing weight can reduce your risk factor and alternately reduce your life insurance premiums. So while you get to look and feel good, so does your wallet and savings account.

Drink less

Excessive alcohol consumption can be seen as a health risk by life insurance providers, and insurers may not offer cover in this case, or if they do offer cover it might incur loading fees or increased premiums to cover 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 provider that you have changed your drinking habits for the better, then your life insurance provider may see you as less of a health risk.

Live safer

If you’re used to living life on the edge, and usually get a thrill from extreme sports and risky hobbies, then you may need to change your lifestyle if you want to reduce your life insurance premiums.

Some insurers may have exclusions on certain activities, or will apply waiting periods for income protection or incur loading fees on them. With some providers, you will pay more for your life insurance premiums if you are a daredevil and regularly engage in extreme activities like skydiving, skiing, motorsport/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.

Change occupations

While changing jobs or occupations for something less risky isn’t an option for everyone, it is an option to possibly reduce your life insurance premiums. For life insurance providers, it’s all about presenting less of a risk. Life insurance policy holders that have risky jobs or occupations are more of a risk of claiming on their policy earlier and may have increased life insurance premiums through loading fees (if their occupation isn’t already listed as an exclusion).

This can include occupations like being in the armed forces, firefighters, police officers, pilots, construction workers or miners that operate heavy machinery, working at extreme heights, or jobs that involve driving like a truck driver which can increase your odds of having a serious driving accidents; these are more risky to insure for life insurance than safer jobs and may impact your 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 84.6 years, while boys have a life expectancy of 80.4 years. The older you are, and the closer you are to this life expectancy age when you purchase life insurance, will increase your premiums. This is because you will only pay premiums to your insurer for fewer years before you are 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 their young age. However, insurers may see younger customers as less of a risk of claiming, 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 tip on how 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 value on your life insurance, and reduce your life insurance premiums, follow these tips and don’t wait too long to purchase cover. Get the right level of life insurance cover for your lifestyle, budget, and family’s needs before it’s too late.


1. http://www.lifewise.org.au/downloads/file/aboutthelifewisecampaign/2010_0203_LifewiseNATSEMSummaryA4FINAL.pdf

2. http://www.heraldsun.com.au/news/victoria/average-family-needs-more-than-50000-a-year-to-pay-for-basic-bills/news-story/7fc799a7ab9eb7fe78a33e67c7433889

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