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:
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.
|Food (excluding restaurants & takeaway)||$8,745|
|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.
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.
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.
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.
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:
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.