Life Insurance Application and Tips to Reduce Your Premiums

Reducing the cost of life insurance premiums when applying.

A common misconception held by many Australians is that life insurance is too expensive. However, many people make the mistake of simply getting a quote from one provider (often the same institution that manages the rest of their insurance) and then leaving it at that. Many people neglect taking the time to:

  • Research different policy options
  • Get an understanding of cover features relevant to their needs
  • Get advice from an insurance specialist
  • Compare different policy options

These are just some of the steps you can take to ensure you find affordable cover that will still give you and/or your family an adequate level of protection. This article will discuss key steps you can take to cut your premiums and save.

Before you apply: Five steps to reducing life insurance premiums

1. Improve your health

You can’t do anything about your age or medical history, but you can change a lot of lifestyle factors that will drive your premium down. Here are some key steps to improve your health to reduce your premiums:

    • Stop smoking. Smokers will as pay as much as double to non smokers for like cover. A smoker is recognised as anyone that has smoked in the past 12 months. It is possible to contact your insurer to have your premiums adjusted to reflect non-smoker status if you were once a smoker that has since quit.
    • Lose weight. An insurer will not increase your premiums based just on your weight. However you may receive a premium loading if you suffer from other medical conditions as a result of your weight such as:
      • Diabetes
      • High blood pressure
      • High cholesterol

Losing weight and showing that the any other medical conditions are controlled can greatly reduce your premiums.

  • Reduce alcohol intake. Each insurer will ask how many standard alcoholic beverages you consume each week. If an underwriter deems that you are a moderate to heavy drinker and it is impacting on your health, you may be required to undergo a medical examination during the application process. Failure to disclose this information, similarly to smoking, may see your policy rejected in the event of a claim.

Learn more about how your health impacts your premiums

2. Know how much cover you need

Nobody wants to have too little cover in place but having too much cover is only going to drive up your premiums. Take the time to sit down and work out how much you would actually need in the event of a claim being made. Consider:

Outstanding financial obligations and how many years you would need to cover these for

  • Mortgage and other personal debt
  • Everyday living costs
  • Education expenses
  • Household bills
  • Maintenance expenses
  • Home caring
  • Medical costs
  • Final expenses such as funeral and financial planning costs

Other cover you already have in place

  • Life insurance in your superannuation
  • Benefits from work you might be eligible for
  • Assets that you would be able to sell, including any investments

3. Apply when you are younger

Applying for life cover at a younger age can bring significant savings as you are able to lock in a cheaper rate as premiums increase dramatically the older you get. Most insurers offer guaranteed renewability which allows you to increase your cover without having to undergo medical underwriting and face a premium increase. Premiums are lower when you are younger as you are less likely to have pre-existing medical conditions and are considered less of a risk to insurers.

4. Research different policies

The Australian insurance market is made up of both basic and comprehensive cover options each with different levels of benefits suited towards people with different cover requirements. It is good to actually get an understanding of the different benefits and features available on policies to allow you to better tailor your policy to your needs and keep it affordable. It is not much use paying higher premiums for features that aren't really relevant to your situation. Things to consider when reviewing different policies

  • Additional cover benefits
  • Premium structure options i.e stepped, level or hybrid
  • Premium payment frequency and its impact on pricing
  • Annual premium fee
  • Discounts for joint policies
  • Option for rollover of super funds to fund cover

5. Speak with an insurance consultant

An insurance adviser can help you compare hundreds of different policy options and design your cover to meet your requirements. By using their knowledge of the different providers, advisers can assess who will offer affordable cover based on the level of risk you carry. Key benefits of applying through a consultant:

  • Help explain the different policy features available
  • Help design the policy to include additional cover i.e. trauma or tpd
  • Help you through the entire application process, from comparing different policies to submitting the paperwork

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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
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William Eve

Will is a personal finance writer for specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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