How do I get affordable term life insurance?

Looking for the cheapest term life insurance option but don't know where to start?

Term life insurance is a form of cover that provides financial protection for your dependents should you pass away or be diagnosed as terminally ill with no more than 12 months to live. You can also nominate the period of cover (or terms) that you would like your policy to be active. Applicants often select terms ranging from 5, 10, 15, 20, to 30 years.

This article will provide an overview of the different factors that impact what you will pay for term life cover and what you can do to reduce your premium. If you are ready to compare quotes, simply enter your details in the form to compare policies and quotes from Australian brands.

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Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
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How much does it cost?

The cost of your term life insurance will depend on a number of factors including:

  • Age: is considered to have a strong correlation with your health. Therefore, the older you are, the higher your premiums will be.
  • Gender: Your gender can affect the level of premiums you pay. For example, men often pay higher premiums for life insurance compared to women. This is because of the associated health risks that affect men at a certain age.
  • Occupation: If you work in a high-risk environment, your premium rates will be higher compared to those who are considered as low-risk, such as office workers.
  • Current health and any pre-existing medical conditions: If you have a pre-existing medical condition such as diabetes or high blood pressure, your premiums will be higher compared to those who have good health.
  • Lifestyle habits: such as smoking will increase your premiums by almost double. People that are considered to be heavy drinkers can also expect to pay higher premiums. At the time of application, you will be asked how many standard drinks you consume on average each week.
  • Hobbies and pastimes: High risk activities outside of your occupation such as skydiving, parasailing, or motorcycle riding can affect your premium rates as you are considered to carry additional risks from these pursuits.
  • The cover you select: Prior to application it is worth taking the time to determine your current and future financial obligations to get an idea of an appropriate level of cover to apply for.

Can I get cheaper cover if I apply young?

Consider applying for cover while you are still young, as you are considered to be less of a risk to insurers due as there is less chance of you having any preexisting medical conditions. This will be reflected in the premiums you pay. Most insurance companies allow policyholders to continue their cover for as long as they require, provided that premiums are paid on time.

Your term life cover rates will increase overtime as you get older. So, while it may get more expensive in the later stages of your life, you can always make some adjustments by lowering your cover amount or by removing extra benefits that you may no longer need. Just make sure you are still sufficiently insured to look after your dependents.

How will the type premium I choose impact what I actually pay?

From among the methods of how to make insurance more affordable, the last one is considered to be the most preferred. There are different ways to pay your monthly insurance premium to make it as affordable as possible for you. The most common are:

  • Stepped Premium: Aptly named because of its nature. It is calculated more than once as you grow older every year. The rate increases or step-ups are concurrent to the risk factors a person is likely to be involved in. This means that the value of your policy could change a lot. These rates could increase up to 15% by the time you retire.
  • Level Premium: It works exactly the opposite than the stepped premium. Considered as a fixed mortgage, recalculations are less likely to happen in this kind of premium. This also has a set end date already provisioned at the beginning of the policy. Therefore level premiums are not only based on your age and amount of cover, but also with the duration of the policy.

While level premiums may be more expensive at the start of the policy, it will actually be more affordable in the long run than choosing a stepped premium structure. A stepped premium can suit applicants with limited disposable income when they are applying.

What else can affect how much I will pay?

As previously mentioned, there are a number of different elements that will influence the cost of your term life insurance policy, which are based on your situation and your choice of premium structure. However, there are other factors that will also affect the final premium amount that you pay. These include:

  • Bundling your cover with trauma and/or TPD rider: You can opt to combine your term life policy with additional trauma and/TPD cover for more comprehensive cover. Bundling your insurance cover will incur additional costs, although it will generally be more affordable than having separate policies for different types of cover.
  • Including additional options on your policy: Most providers will offer additional features and options that you can take up that will cost extra. It is important to assess the benefits of these options and how it will match your needs for cover.
  • Additional fees: Some insurance providers may require you to pay a small policy administrative fee and a stamp duty, depending on the state of your primary residence when you sign up for a policy. Stamp duty charges will vary between states.

How will speaking with an adviser help me get low cost term life insurance?

Speaking to an insurance adviser will provide you with the assistance that you may need to find affordable cover that suits your personal circumstance. An insurance provider has the expertise and knowledge of the market to be able to find competitively priced policy options that are tailored to your needs. In addition, if you are considered to carry an additional level of risk due to certain lifestyle factors, an adviser can help you find an insurer willing to provide cover for specialist risk.

Unlike a financial planner’s service, consultation with an insurance adviser is free-of-charge and you have no commitment to sign up for a policy right away. This grants you the flexibility to take your time to find an appropriate policy option and get a clear understanding of the terms and conditions prior to application.

5 steps to reduce to your premiums

  • Don't buy the first term life insurance policy offered to you: Shop around a bit have a good look at what's available. Check out any testimonials you find online and when you get down to business make sure you thoroughly read the terms and conditions.
  • Quit smoking for good: This might sound a bit drastic but it works two ways. If you haven't smoked for at least 12 months your premium payments will be much lower than they would have been if you had continued smoking. The insurance industry work on statistics and if they feel they have to charge you a lot more before they'll insure you because you're a smoker, don't you feel that's a good enough reason in itself to give it up.
  • Keep yourself fit and healthy: Life insurance is all about how long the insurance company thinks you're going to live. If you're seen to be knocking on deaths door you'll have to pay a substantial amount before you'll get any cover at all, you might even be declined cover, The less risk you pose to the insurance company the less you'll have to pay for the cover.
  • Buy your cover while still young: The longer you put off buying life insurance the more you'll have to pay. Age is as important to an insurance company as is your health and lifestyle and the older you get the more expensive the cover will be.
  • Joint life cover: Why not include your partner/spouse on your term life insurance policy? Not only will the both of you be covered, but you will also be eligible for discounts on your premiums.

Why should I consider term life insurance?

Despite Australia being a developed country, as many as 95% families with children are underinsured, with around 40% of the population with no life insurance cover in place at all (Lifewise/Natwise, 2010; Comminsure, 2012). Most people are quick to insure their car or home before taking out life or income cover for themselves with 83% of Australians having car insurance in place. (AAMI, 2008).

Why is this the case? Some may argue that it is because the benefits of term life insurance are less tangible to that of car insurance, with others who choose to push the thought of actually needing life insurance to the back of their mind. When asked why they don't have life cover in place, many people will respond with one of the following:

  • “I don’t really need it.”
  • “Nothing will happen to me.”
  • “Life insurance is too expensive.”
  • “It’s just too complicated.”
  • “It’s only for families with kids.”

The cost of life insurance remains as the key reason deterring many Australians. Most people would simply say that they cannot make way for another expense in their monthly budget. A recent survey conducted by TAL in 2013 on 1,260 Australians also showed other reasons - 18% cited that they had no family who are dependent on them and in need of protection, and 17% thought that health insurance offered similar protection to life insurance (TAL, 2013).

However, as most problems are, there is always a solution. Purchasing life insurance does not need to eat up a big chunk of your monthly income. There are ways how you can make insurance more affordable and less stressful for your budget.

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Maurice Thach

An insurance-savvy writer for who loves finding an answer to the question "Am I covered for ________?"

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