What does life insurance cost?

How much does life insurance actually cost and what impacts the price?

Life insurance is one of things you can’t afford to be without. While you may live a relatively risk-free existence, unexpected situations can leave you in a perilous position, both emotionally and financially.

This is why life insurance is such an important consideration. Life insurance takes care of your family’s finance when you are no longer able to. It provides you with peace of mind knowing that, while you may no longer be around to look after them, they will be okay.

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How much does life insurance cost?

There are many things that can affect the cost of your life insurance policy. When you apply for life insurance cover, the company will look at the type and level of cover you are applying for, along with the kind of risk they are assuming by issuing you a policy. This is the process by which the insurance underwriters will determine the premium you will be paying.

The factors that go into calculating the amount of risk you pose varies from company to company but generally includes:

  • Age. Your age is one of the most important factors when it comes to life insurance. Applying at a younger age will generally enable you to secure a much more competitive rate on your premium than if you were to apply in your 50s.
  • Gender. Gender is another key variable in influencing your premiums. Because Australian men have a lower life expectancy than women, they pay a higher premium.
  • Smoking status. This is a huge determinant on how much your premium will cost. Smokers are liable to be slugged with premiums double that of non-smokers. In fact, some policies class anyone who has smoked in the past 12 months, casual smokers or anyone who used a nicotine derivative product (cigars, nicotine gum, chewing tobacco, nicotine patches, electronic cigarettes) as being a smoker, so it is important to read the fine print of your policy document.
  • Weight. A policyholder’s weight and overall health almost as important a variable as a person’s smoking status. Excess weight can lead to a range of health concerns and as such, overweight policyholders are liable to pay higher premiums.
  • Alcohol consumption. High levels of drinking also lead to increased premiums. Again, check your policy document to see if there are any indications of what that level is.
  • Pre-existing conditions. Some policies will cover you for certain pre-existing conditions but they may require you to pay a higher premium due to the increased amount of risk on their behalf.
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How much?

Finding the right insurance policy for you require more that just settling for the first or the cheapest policy you come across. Life insurance costs vary from company to company but so do their levels of coverage, inclusions and exclusions, which is why is imperative you do your homework.

There are several conditions that can have an affect your life insurance costs including:

  • Minimum and maximum entry age. When you purchase a life insurance policy you will be covered by the policy until the period end date. These end dates vary from one provider to another but, as a general rule of thumb, most insurers will insure Australians aged between 18 and 75 years of age.
  • Level of insurance. This refers to the amount that you want to insure your life for. If, for example, you are married, have little debt (eg, credit card or mortgage) and no dependants, your premiums will be significantly lower than someone who is married with three children and is mortgaged to the hilt.

Tips to compare life insurance costs

The key to getting a good deal on your life insurance is to survey the market, this is where life insurance cost comparison comes in. Once you have worked out the different types of risks you possess and how that will eventually affect the premium you’re going to pay, it’s time to take to the web.

The Internet has empowered consumers and furnished them with the ability to communicate with a raft of providers and compare a policy’s pros, cons and most importantly (for some) price. It has also allowed consumers to get multiple quotes, from the comfort of their own home, and compare these policies side by side without a push salesperson breathing down their necks.

When comparing policy, the cheapest policy is not necessarily the best value. While at face value the policy may seem to be more economical, it will most likely not provide your family with the desired amount of cover.

Some questions to ask yourself when comparing policies include:

  • What benefits are guaranteed under the policy?
  • Does the policy have dividends?
  • Are there fees built into your premiums?
  • Do the benefits decrease as you get older?
  • Do they cover pre-existing conditions?
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Tips to get low-cost life insurance

Life insurance can be expensive. But, it doesn’t have to be. There are strategies that most people can employ in order to bring down how much they are paying for their premiums.

  • Quit smoking. This is by far and away the easiest way to reduce how much you are paying for your life insurance premium. As mentioned earlier, smokers are liable to pay double that of non-smokers for life insurance, so give them away. After 12 months, contact your insurance provider and tell them that you are no longer a smoker and they will readjust your premiums.
  • Eat right and exercise. As with smoking, a person's general health and weight are crucial factors when it comes to premium payments. If you start exercising and have lost weight from the time of your policy commencement date, contact the company and have them readjust your policy accordingly.
  • Change in situation. Life insurance is designed to protect your dependants should the worst happen. It is there to pay off any outstanding debts and look after your loved ones. But, if you have reached a point in your life where you have minimal debts and your children that have moved out of home, it is wise to call up your insurance company and reduce the level of coverage. There is no point paying for something you don't need.
  • Joint cover. If you are in a relationship you can receive a break in your insurance premium of up to 15% if you elect to combine your two policies.
  • Ask for a discount. If you are shopping around for a policy and already have other insurance, contact that company and see whether they will offer any kind of a discount. Increased competition between providers has meant that many run short time offers to attract new customers and hold onto old ones.
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Who needs life insurance?

Anyone with dependants needs life insurance. The last thing you want to do is to leave your family, who are already dealing with the emotional pain of losing you, to experience the harsh financial reality of what your loss means.


Single people who do not have any debts or dependants rarely take out life insurance because they are not leaving someone behind who was financially dependent on them. While this is the norm, there are some exceptions including:

  • Singles who provide financial support for their aged parents
  • Singles who provide financial support for their siblings
  • Singles who want to pass on a house or property debt free to a family member.


Couples should always have a life insurance policy in place, regardless of whether they have children or not. When taking out a policy you should consider the following:

  • Couples without kids
    • Whether your partner would be able to make payments towards the rent or mortgage
    • Whether your partners standard of living would be negatively impacted
    • Whether your partner would be able to pay off any outstanding credit card debt or car loans.

Couples with kids have to make the same considerations and additionally:

  • Couples with kids
    • Cost of schooling and whether or not you want to set money aside for your children’s further education
    • Your children’s standard of living.

Stay-at-home parents

The stay at home parents is one of the most underappreciated professions. While you may not be drawing an income, your contribution to the daily running of the family and household is invaluable. Reasons to take out life insurance as a stay at home parent include:

  • The possible need for outside help in raising the children, i.e. a nanny
  • The potential need for outsourcing the domestic housework
  • The possible need for someone to prepare meals.
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What are the different types of life insurance available?

While most people think of life insurance as a policy that covers you in the event of your death, there are additional features and other policies that you can avail yourself of, which include:

1. Life Insurance

This is your broad strokes policy that pays a benefit to your family should you die or be diagnosed with a terminal illness. This covers all of your outstanding debts, to the policy limit, and means that your family’s financial life should not be impacted.

2. Total and Permanent Disability Insurance (TPD)

TPD is a policy that pays your family a benefit should you become permanently disabled and are unable to return to the workforce in any capacity. The lump sum can be used in any way you want and is designed to help you pay off your family’s debts and help to keep your family living in a manner that they are accustomed to.

3. Income Protection Insurance

Income protection provides your family with a benefit of up to 75% of your current annual income should you no longer be able to work because of an illness or injury. The time of cover varies between providers so check your policy document.

4. Trauma Insurance

Trauma insurance provides a lump sum if you are diagnosed with one of a list of specific illnesses. The list includes:

  • Blindness
  • Cancer
  • Dementia
  • Heart attack
  • Quadriplegia
  • Stroke

The benefit is designed to help you take time off from work so you can get treatments and recuperate.

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Stepped premiums vs level premiums: How does it impact the cost of life insurance?

When it comes time to decide on how your premiums will be structured you have a choice, stepped or level premiums? Each type has its pros and cons and depends entirely on your situation and how much you are willing to pay.

Stepped premiums

Stepped premiums are recalculated as you get older, meaning that while you may be paying lower premiums at the beginning of your policy, you will be paying a lot more by the end.

Level premiums

Level premiums are as the name suggests, even. Once the insurer has calculated the term of the policy, they will then average out the premium payments across that term. While this is initially the more expensive of the two choices, it does end up costing you less in the long run.

There is no definitive answer as to what type is right for who. Stepped premiums are suitable for someone with limited disposable income and generally best for someone at the beginning of their career. While level may beneficial for people who want to know exactly how much they will be paying and do generally end up being the cheaper option.

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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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Maurice Thach

An insurance researcher and writer for finder.com.au who loves finding an answer to the question "Am I covered for ________?" Maurice has also completed a Tier 1 Life Insurance and a Tier 2 General Insurance Certification under ASIC's Regulatory Guide 146. This means he can confidently provide general advice for life insurance and non-life insurance products.

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