How do I get cheap term life insurance without compromising on cover?
Three quick steps to getting the cheapest life insurance insurance quotes:
- Understand your personal needs. That is, how much cover you need and what type.
- Compare multiple quotes. Review either online or with an adviser for the cheapest quote.
- Avoid extras if you don't need them. For instance, drop the additional trauma cover if you only need basic life cover.
This article aims to provide you with the knowledge of what to look for in a policy, how to save money on life insurance and ultimately how to find the right cover, at the right price.
Compare life Insurance Quotes and Find a Low Cost Option
What are the cheapest life insurance policies available?
Below are the top 3 cheapest life insurance policies available on the finder.com.au quote engine for the age groups 35, 45, 55.
Cheapest life insurance for a male (35 year old)
|Policy||Premium (per month)|
|MLC Life Insurance||$25.58 per month|
|AIA Priority Protection||$30.06 per month|
|Asteron Life Complete||$30.18 per month|
|AMP Elevate||$30.22 per month|
|TAL Accelerated Protection||$30.48 per month|
|Zurich Wealth Protection||$30.91 per month|
|OnePath OneCare||$32.00 per month|
|CommInsure Protection||$32.19 per month|
|ClearView LifeSolutions||$32.20 per month|
|Macquarie FutureWise||$32.51 per month|
|BT Protection Plans||$33.27 per month|
|AMP Flexible Lifetime Protection||$33.71 per month|
Cheapest list insurance for a female (35 year old)
|MLC Life InsurancePolicy||Premium|
|MLC Life Insurance||$20.12 per month|
|AMP Elevate||$23.87 per month|
|TAL Accelerated Protection||$24.12 per month|
|AIA Priority Protection||$24.14 per month|
|Asteron Life Complete||$24.37 per month|
|OnePath OneCare||$24.93 per month|
|BT Protection Plans||$25.33 per month|
|ClearView LifeSolutions||$25.34 per month|
|CommInsure Protection||$25.56 per month|
|Zurich Wealth Protection||$25.57 per month|
|Macquarie FutureWise||$26.88 per month|
|AMP Flexible Lifetime Protection||$28.15 per month|
Note: quotes are based on a policy taken out in NSW for a sum of $500,000 for a non-smoker.
|MLC Life Insurance - Cheapest||$43.78|
|Asteron Life Complete||$48.98|
|ClearView Life Solutions||$51.25|
|MLC Insurance - Cheapest||$33.05|
|Asteron Life Complete||$39.37|
|AIA Priority Protection||$40.21|
Quotes are a rough estimate and don't take into account your personal situation. Figures are correct as of 30 August 2016 and are subject to change.
What policy offers you the best value for money?
Term life insurance is the most common life insurance policy you can apply for in Australia. It is also one of the simplest forms of life insurance. Term life is cheap life insurance because of its flexibility. Term life insurance allows you to tailor and modify your cover to suit your needs. You are also able to apply for large cover amounts, without being weighed down by hefty premiums, making it the cheapest life insurance.
How Does Term Life Insurance Work?
A term life insurance policy consists of four main factors:
Amount of cover
Term life insurance allows you to nominate your own cover amount for a period of time, which is called the term. The benefit amount is payable if you die or are diagnosed with terminal and are told you have less than 12 months to live. Your nominated beneficiaries can use the benefit payment to cover their financial commitments and settle any outstanding debts.
It is important to determine the right amount of cover for your dependents to cover any immediate expenses and ongoing living costs, as well as to anticipate future expenses and debts. Consider using a needs approach to provide you with an ideal estimate a amount sufficient of cover.
Length of cover
With term life insurance, you can also choose a period of cover most suitable for your situation. Most applicants opt for terms of five, 10, 15, 20 or up to 30 years. Once the term of your life insurance policy ends, it is up to you to renew or cancel the policy. Should you choose to extend your cover, most Australian providers will continue to insure you, provided the premiums are paid when they are due, regardless of any changes in your health, occupation or pastimes.
Policy features and benefits
As previously mentioned, you can tailor your term life insurance policy with additional features and options to suit your needs. It is essential to compare multiple policies so that you are aware of the built-in benefits on offer, which often vary between insurance providers.
The monthly premiums
The monthly premiums rates you pay will depend on different factors, such as:
- current health
- lifestyle habits such as smoking and alcohol consumption
In addition to these factors, other elements such as your choice of additional options also drive up your life insurance premiums.
Most insurance providers offer you the flexibility of choosing a payment frequency that best suit your financial situation, usually on a fortnightly, monthly, quarterly or annual basis. Paying your premiums annually can bring significant savings as opposed to monthly.
Will a term life insurance policy save you money?
The cost of life insurance may seem like another burden on your already limited budget, but there is a way to cover yourself and protect your family with term life insurance. Term life insurance can be a cheap life insurance because:
- Larger benefit amounts are available. When you compare term life insurance you will often find that you can be covered for large benefit amounts, for a relatively low premium cost.
- Term insurance is easy to understand and compare. This means that you can make simple comparisons to easily choose the most affordable term life insurance coverage, and you also save yourself time.
- You only pay for what you use. Term life insurance is just like your car or home insurance, you are covered for as long as you pay the premiums. When you stop paying your premiums, your cover ends. This means no portion of your term life insurance premium is going towards an investment account, which makes the premiums relatively cheaper.
- You can be covered only when you need to be. When you're young, you have a lot of financial obligations such as a new family. Term life insurance protects you and your family during this high risk period. As you get older, you can reduce your cover since your financial obligations shrink, like your mortgage.
- You can take out insurance for both partners. Since term life insurance is so affordable, you can take out a joint policy.
There are many advantages of term life insurance but it is essential to be aware of the disadvantages:
- Term life insurance has an expiry date. When you are reaching the end date of your policy and you find that you still need life insurance coverage, re-applying for a new policy may be expensive when you are older and your health is not in top shape when you first had your term life cover.
- Restrictions on policy payouts. If you live past the period set on your life insurance policy and no claim has been made, the premiums you paid won't be refunded. Also, if you change your mind about your life cover and would like to cancel the policy after the cooling-off period set by life insurers, you will not get the premiums you have paid refunded.
How can you pay less for life insurance?
There are a number of ways you can reduce the costs of your premiums:
- Choose annual premiums. Pay your premiums yearly instead of monthly or fortnightly. If you do you can often avoid a loading being applied to your premiums for administration costs.
- Tell your insurer everything. The more information you can give your insurer in the application, the better they can tailor your policy, and make it more affordable.
- Partial or full underwriting? With insurance that doesn’t require medical information, the insurer is taking a big risk on you and charging you accordingly. Opt for a fully underwritten policy, you’ll have to answer a few more questions, but if nothing is wrong you’ll usually end up with cheaper premiums.
- Lower your BMI. Your body mass index is used by many insurers to gauge your health, and if you have a healthy BMI between 18.5 – 30 kg/m2 you can avoid a loading on your premiums.
- Quit smoking. Non smokers can usually pay half as much in life insurance premiums as those who smoke, even if you are just a social smoker.
- Couples insurance. If you are part of a couple, you can often qualify for a multi policy discount if you take out insurance together. However, if you do have two separate policies as a couple, you may want to keep it that way so that if one partner dies, the other’s policy carries on.
- Shop around. You should treat buying cheap life insurance in the same way you would buying any other important product – a house, a car, a computer – and make sure you shop around and compare prices and options to secure the best deal.
- Enquire online and speak with an insurance consultant. One great way to compare cheap life insurance policies is by shopping online. You can go at your own pace, any time of the day or night, without the pressure of making a decision right away. Many insurers offer discounts when you buy online.
- Term life insurance is cheaper. Term life insurance covers you for a set term as the name suggests, which makes the premiums cheaper than whole of life insurance and as such, the premiums per month are cheaper.
- Don’t go for the largest benefit amount available. As you start considering every unforeseen event that could befall your family, it is easy to get carried away and take out more cover than you actually need. Using a life insurance calculator is a great way of making sure you're not over- or under-insured.
- Remember insurance advisers work on commission. Ask up front how much their commission is on the sale of your insurance, and remember, that the more insurance you buy, the more the adviser earns.
- Beware of guaranteed insurance. Guaranteed insurance doesn’t require you to take a medical test. Since the insurer doesn’t know what your risk factors are, if you have any, they are charging you higher premiums to protect themselves.
- Manage your policy. You need to make sure you keep your details up-to-date with your insurance company. Lifestyle changes suck as quitting smoking or changing jobs can affect your premiums.
- Take out cover when you’re young. The younger (and healthier) you are, the cheaper your life insurance. Once you have a policy, you can often renew it each year without having to complete more medical checks.
What to ask yourself before cutting costs
It is possible to get cheap life insurance premiums in many ways such as switching policies, decreasing your cover amount or choosing a shorter term. It is critical that anyone considering this take the necessary steps to ensure they are not leaving themselves underinsured. To avoid this from happening, you need to be aware of the following:
- Why life insurance is important? If you're considering lowering your life insurance costs remember why you took out the cover in the first place. As in all other things in life, your circumstances continue to change. It is essential to have sufficient protection in place to cover against any remaining financial obligations that you may have.
- Can I get cheap term life insurance? Yes. Term life insurance provides a cost effective financial protection solution. However, the premiums increase significantly as you get older, especially from 45 years old above, so it's better to take out term life insurance earlier on in your life.
- When should I take out my policy to get the cheapest life insurance? It's wise to get cover earlier in your life to cover your obligations when they are at their greatest and reduce your cover as your obligations diminish.
All this takes planning and you may want to consider speaking to a adviser to make sure your family is receiving the right financial protection.
What are the risks of buying cheaper life insurances?
Renewing Your Cover
Term life insurance is considered low cost life insurance as it's taken out for a specific period and once that time runs out the policy expires if it's not renewed. A renewal costs more than the previous cover as the premiums increase as you get older. It's as you get older that you start running the risk of being under-insured because it's the practice of many people to lower their cover when purchasing a renewal in order to avoid paying a greater premium cost.
In many cases it can be quite sensible to lower the amount of cover you have on renewal, especially if the insurance's been taken out to cover the mortgage on your home because the mortgage debt decreases over that same period. However, in many other cases it's not such a good idea as it could finish up leaving your family heavily under-insured at a time when they are most vulnerable to losing everything should die unexpectedly.
The greater difference in cheap life insurance premiums, other than your age, is the number of options some life insurance companies attach to the cover. Many of these options are quite useful and a required add-on, therefore before you choose cover based on premium cost alone, have a good look at what you're missing out on with the cheaper policy.
Balancing Price with Adequate Cover
Your main concern when reviewing your life insurance policies as they come up for renewal, is to make certain you retain adequate cover to match with your needs. finder.com.au’s survey in 2013 shows that 65% of Australian families are greatly underinsured. This leads to many families suffering severe financial hardship when it could have been avoided if more care had been taken when the cover was renewed.
How to avoid underinsurance
- Most cheap life insurance providers offer a Guaranteed Insurability Feature on their life policies, either built in or at an additional cost. Guaranteed Insurability on your policy allows you to increase your life insurance coverage at a nominated date (birthday or policy anniversary) without having to submit further medical evidence on significant life events.
- Know the life events that your term life policy cover, which often include but are not limited to:
- Getting married
- The birth of a child/children and/or adoption
- Taking out a mortgage
- Buying a house
- A dependant child starting secondary school
- Death of a spouse/partner
- Continuously review your policy, particularly at specific life events. You may find that you may need to increase your coverage, especially at the time your financial obligations are highest. You can also decrease your coverage if you have smaller financial commitments. Having paid off your mortgage, with minimal debt and your children leaving home. You can also assess which features and benefits of your policy are most relevant to your situation at the time. Additional options that you no longer require can be taken off, hence making your premiums cheaper.
Look at the fine print
- Reviewable Premiums. Some insurance policies will have reviewable premiums whereby the insurer is able to increase your monthly premium further into your coverage term. For this reason it may be wiser to choose the policy offering the lowest guaranteed premium.
- Joint Policies. While taking out cheap life insurance with your spouse/partner may reduce your monthly premiums, in most cases you will not receive the same amount of coverage. If you were to take out $200,000 worth of coverage that will be coverage for only one person in the event of death within the term. The other partner will be left without any insurance if one of them dies.
- Income Protection Insurance and Critical Illness Insurance Beware. If taking out income protection insurance or critical illness insurance it is essential that you do not compare policies on cost alone. Cheaper plans may not have as comprehensive cover with the selection of medical conditions covered being far narrower.
- Adequate Death Benefit. It is crucial to ensure that in the event of your death that there is an adequate amount to support your dependents. If buying term insurance at a lower rate there is a chance that policyholders may not receive the best cover possible.
Should you get life insurance through your super?
Australian life insurance changed quite significantly when superannuation became compulsory for all workers. Superannuation funds were able to provide sufficient money for workers when they retire, but if they pass away was before sufficient funds have accumulated in the fund to provide an adequate standard of living for the employee’s family, life insurance existed to fill the void.
Term life insurance therefore became the insurance cover of choice and can now be obtained through your super fund. Life insurance through superannuation is the cheaper option compared to policies obtained outside a super environment. However, it is important to note that while life insurance through super is more affordable, it is not without its shortcomings.
Some of the advantages and disadvantages of obtaining cheap life insurance through your super fund include:
What about rolling over your super?
- A number of life insurance companies that work with eligible super funds to allow existing members to transfer cover from an existing fund to a new policy
- Access to insurance tailored to your needs while still funding premiums through your superannuation
- Invest funds in same super and rollover funds
- Insurer will pass on superannuation rollover tax benefit to reduce premium
- Choose how much you rollover (e.g. two to three years worth of premium)
When is the right time to get life insurance?
You can nominate the term for your cheap life insurance policy at the time of your application. The most sought terms are five, 10, 15, 20 or 30 years. When deciding the appropriate duration of your term life coverage, it is important to assess your needs and personal situation, as well as what you are looking to cover in the future.
Every family’s needs and circumstances are unique. Therefore, choosing an appropriate period of coverage is also as important as deciding on the amount of life cover you are insuring. Consider the following:
Consider where you would like to be in 5, 10 or 20 years. Think of the various life events such as buying your first home, getting married, or having a child/more children, and how they would effect your family's finances. These events all impact your cover needs differently.
Your financial circumstances
If you are young and have just started your career, you may have limited financial resources. Since you have no financial dependents and you have only accumulated a small amount of debt, a short-term life cover may be appropriate. It is important to remember that your personal and financial circumstances change overtime and you should consider this when choosing an appropriate term.
For example, if you apply for a long-term life policy (20 or 30 years) when you are young, the costs of your premiums would be lower than if you were to take out the policy later in your life. If you choose to have a level premium structure your premiums cost the same throughout the term. Whereas, stepped premiums start out costing less but increase with each year of the term.
If you are married and have young children
When considering a period of cover for term life insurance, it is essential to determine the level of financial obligation your family have to meet in the event you were to pass away. This includes education expenses if you have young children.
Your long-term debts
If you have bought your first home, it is very likely that you have a long-term commitment to meet your monthly mortgage repayments. Your term life coverage period should reflect the time required for you to pay-off your mortgage (as well as making sure that there is the amount insured is sufficient to cover the repayments).
Walter and his 20 Year term life policy
When Walter applied for his term life policy he was 35 years-old and working as a high-school science teacher in Sydney. His wife, Skyler (31), worked as a part-time bookkeeper for a small family-owned business, which had allowed her to have flexible working hours so she could also take care of their two young children, aged six and four.
Walter nominated a 20 year term life policy because he wanted to make sure that his kids would be able to attend university and remove any financial pressure on his wife, if he was to pass away suddenly. By the time his life policy was about to expire, his children would be 26 and 24 years old. This means that they would have moved out of home (hopefully) and be earning their own income.
Another reason why Walter opted for a 20 year term is because he and Skyler had recently bought a bigger house for the young family. While Walter was earning $100,000 a year, Skyler's part-time salary was $20,000, which meant that if he was to die prematurely, Skyler's income on its own would not be sufficient to keep on top of the mortgage repayments, let alone keep up with the daily living expenses and debts.
Do you need family life insurance?
Joint Life Insurance Policy
If you are looking to secure cheap life insurance cover, then you may want to consider to include your spouse/partner in a joint policy. A joint life insurance policy, as the name suggests, is a cover owned by two individuals that usually have an interdependent relationship, such as those of married or de-facto couples and business partners.
It is important to remember that even if your partner/spouse is a homemaker, that doesn’t mean that cheap life insurance is less important for them. Even if they contribute very little or no income to the household, losing a homemaker can cause significant financial hardship to any household.
Joint life insurance can provide valuable protection that both you and your partner can benefit from. In addition to peace of mind, you also be eligible for a 5-10% discount on your premiums.
Some insurance providers may offer life insurance cover for your children for free or at an additional cost. Children’s cover can provide valuable protection should your child suffer from a serious illness or injury, and provide financial relief for medical and hospital bills incurred. Child cover is also designed to provide a death benefit in the event that you child passes away.
Can you get life insurance without doing a medial exam?
If you want to buy cheap life insurance without having to go through the hassle of a medical examination, then you may want to consider direct life insurance. Applying for direct life insurance is simple and straightforward, with very limited or no medical underwriting required.
Direct life insurance may be a more suitable option for applicants who know what they are looking for from their policies or if they are looking for policies to cover specific needs, such as mortgage protection or to secure large business loans. However, as you are not required to undertake any medical tests, direct life insurance providers may make assumptions on your health and the level of risk you carry. This can cause your premiums rates to be higher compared to obtaining cover through an insurance adviser.
Why compare life insurance quotes online?
There are many benefits from obtaining life insurance quotes online. Not only do you get better access to cheap life insurance plans, but also:
- Why should I go online for life insurance? You can compare multiple life insurance policies at once to secure the best deal to suit your needs and budget.
- How do I know which policy is right for me? Understanding complex features in a life insurance policy does not need to be difficult. With the help of an insurance adviser, you can get access to tailored recommendations on different policy options suitable for your personal circumstances. Best of all, you can obtain this service free-of-charge and you are under no obligation to sign up right away if you need more time to make a decision.
- Should I go direct? If you want to get cover in place immediately, then you may want to consider purchasing your cheap life insurance policy through a direct life insurer. The application process is simple and straightforward as it can be completed through the phone or in-person through a branch. Cover can be put in place on the same day if there is no need for additional medical information
- Is this process secure? Your personal information will be kept secure when you submit your request for an online quote. These details are necessary to enable direct providers and advisers to provide a preliminary quote and so that they are able to contact you to discuss your cover options.
Cheap life insurance: Frequently asked questions
If you are looking for cheap life insurance it is important that you make careful comparisons and understand exactly what you’re getting from your coverage, because while you may be budget conscious, you don’t want to compromise your cover. Therefore, following are the answers to all of your questions:
Q. How are premiums calculated?
A. You will be able to get the cheapest life insurance premiums if you are young, healthy and lead a low risk lifestyle. Your gender and the level of cover you apply for also affect the cost.
Q. Are life insurance premiums tax deductible?
A. Not usually, although it can pay to check with your own accountant.
Q. Are premiums guaranteed to stay the same?
A. Your premiums will generally be recalculated each year on the renewal of your policy, based on your risk and lifestyle factors.
Q. How can life insurance be paid for?
A. You can pay your life insurance premiums fortnightly, monthly or annually, and in most cases can qualify for a discount for annual payments.
Q. What if the premiums become too expensive?
A. If you fail to pay your premiums your life insurance policy will be cancelled, however, you can contact your insurer to negotiate a lower level of cover for affordability.
Q. Does life insurance cost more for smokers?
A. Yes, life insurance premiums for smokers can be as much as three times more expensive than those for non smokers. To qualify as a non smoker you will have had to quit smoking at least 12 months ago.
Q. How can life insurance be cancelled?
A. You can usually cancel any coverage during the insurer’s cooling off period, and your insurer cannot cancel your coverage unless you fail to pay your premiums.
Q. Are premiums still payable after making a claim?
A. If you claim on a death policy, no more premiums are required to be paid, however, if you are claiming on a living insurance policy your premiums will be reduced by the amount of the benefit paid.