A Guide To Life Insurance Costs

Insurers use various factors to determine the cost of any life insurance policy they’ll offer you.

Some of these factors include:

• The type of coverage provided

• The amount of coverage provided

• Your age when you buy a policy

• Pre-existing medical conditions

Type of coverage

Life insurance cost typically varies depending on the type of life insurance policy you buy. 

Amount of coverage

In Australia, you can typically choose the amount of life insurance coverage you want, within certain limits set by the insurer. However, if you choose a higher level of coverage, your life insurance monthly cost will tend to be higher than if you choose a lower level of coverage with cheaper monthly premiums. 

Use this insurance cost calculator in Australia to determine how much coverage you need according to your current financial situation. 

Your age

Life insurance premiums are generally higher for older people. So that means for Australian seniors, life insurance cost is typically higher than for younger people.

However, certain insurers place less value on age when determining your premium than others. 

Policies that offer level premiums (see below) can also keep your life insurance monthly cost the same as you age.

Additionally, some insurers have programs that will offer discounts on the price of your premium if you meet certain health requirements.

Pre-existing medical conditions

Insurers do typically consider any pre-existing medical conditions you may have when they’re determining your life insurance premiums.

A history of heart disease, cancers, diabetes, or obesity – among other chronic diseases – may mean you’ll pay more for life insurance.

Smokers typically also pay higher life insurance premiums.

Why compare Life Insurance

Comparing policies can deliver significant savings on your life insurance cost. That’s because insurers all put different weight on the various factors they use to determine the premiums they’ll offer you. 

Insurers may also offer different ways that you can structure your premiums. The most common options are stepped premiums and level premiums.

If you purchase coverage with stepped premiums, premiums increase gradually as you age.

Most people opt for a stepped premium policy because they get more affordable coverage when they are young and their incomes are lower.

A stepped policy also means you pay for the specific level of risk associated with your age at the time of coverage.

If you buy a policy with level premiums, on the other hand, your premiums will remain constant instead of increasing with your age, usually until you are 65.

This gives you the security of knowing what you will be paying for coverage in advance.

While the initial outlay may be higher than a stepped premium, there are long term savings gains that can be made.

Life Insurance Waiting Periods

Life insurance policies generally impose waiting periods. That refers to the period of  time that must pass after the commencement of the policy before certain benefits can be paid. 

Waiting periods typically vary between insurers and types of life insurance policies. So it’s important to carefully check the terms and conditions of any policy you’re considering. The experts at Compare Club can also help you compare applicable waiting periods on various life insurance policies.  

Benefits to Life Insurance

In Australia, it may be possible to buy life insurance through your superannuation fund. Doing so will typically reduce how much you need to pay out of your pocket. 

You may also be eligible for a 15% rebate if you pay for your cover through a retail super fund.

Who is Life Insurance for?

Life insurance is relevant for anyone who wants to make sure their loved ones are financially protected after they pass away.

Key Terms

Policy holder: The policy holder is the individual who owns the life insurance policy and is responsible for paying premiums to the insurance company.

Beneficiary: The beneficiary is the person or entity designated to receive the death benefit upon the death of the policy holder. 

Death Benefit: The death benefit is the amount of money paid out by the insurance company to the beneficiary upon the death of the policy holder.

Premium: The premium is the amount of money paid by the policy holder to the insurance company in exchange for coverage under the life insurance policy. 

Additional resources

• Here’s an insurance cost calculator in Australia you can use to determine how much life insurance coverage you need.

life insurance is just a quick click away.

Frequently Asked Questions

How much does life insurance cost in Australia?

Life insurance cost depends on your individual circumstances, and the level of cover you choose. 

For example, a young person with no pre-existing medical conditions may pay considerably lower premiums than an older person with pre-existing medical conditions.

How much should life insurance cost?

That really depends on the level of coverage you want. For example, a life insurance policy that pays a lump sum of $800,000 will typically command higher premiums than a policy that pays out $400,000. 

How much will life insurance cost?

Again, life insurance cost depends on your individual circumstances and the level of coverage you choose. 

The good news is that the experts at Compare Club make it fast, simple, and easy to compare life insurance policies so you can find the best fit for your needs and budget.  

Sources

What affects the cost of Life Insurance policies?, TAL

Term vs. Whole Life Insurance: What’s the Difference?, Investopedia

Understanding The Difference: Term Life Insurance Vs Whole of Life Insurance, LifeBroker.com.au

How age plays a role in life insurance premiums, In the Black

What is superlinked life insurance?, Compare Club

Matthew Lang is the general manager of life insurance at Compare Club. Matthew leads a team of dedicated professionals who are passionate about helping individuals and families make informed decisions about their life insurance needs. Whether it's finding the right coverage for your specific circumstances, comparing policies, or optimizing your existing policy, Matthew and his team are here to provide expert guidance and support.

Meet our life insurance expert, Matthew Lang

Matthew's top life insurance tips

• 1

  Identify what you want out of life insurance before you buy. Knowing the purpose of your life cover will help you choose a policy that meets your needs.

• 2

  It's easy to assume that the sole purpose of life cover is to leave money behind for your family, but there's more to it than that.

• 3

  Life insurers like those on our panel pay an average of 97% of claims in full.

• 4

  There are different types of life insurance, including term life insurance, income protection, trauma cover and total and permanent disability cover.