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Life insurance premiums increases

Inflation, stepped premiums and a rise in mental health claims are some of the reasons for life insurance premium increases.

Looking for a better deal? Compare leading life insurers

If you've noticed your life cover premiums have risen over time, you're not alone. However, many of the reasons for life insurance premium increases are avoidable — for example, you might be able to opt for a different premium structure or switch off inflation increases.

Why do life insurance premiums increase?

Number 1

Premium structure

Most life insurance policies in Australia have stepped premiums, meaning how much you pay increases each year by a certain percentage. For example, if you're with NobleOak, your stepped premiums will go up about 2% per year if you're under 30 and between 5% and 7% in the years following that.

Premiums rise as you get older for that simple reason, you're not as young as you were when you took out cover. The older you are, the more risk you pose to the insurer and the more you'll pay for cover each year.

Number 2


While it may seem like a scam, one of the major reasons your premiums go up every year is because of inflation. Your premiums need to keep pace with CPI so that your sum insured also increases. While you can ask your insurer to switch off this feature, it means your sum insured will remain the same over time.

Say you took out a policy for $250,000 in 1998, for example. If we use an annual inflation rate of 2.6%, you would need a policy worth $420,096.40 to provide you with the same dollar-for-dollar value cover by the year 2018. That's an increase of 68% over 20 years and highlights the importance of letting your premiums increase along with CPI.

How can I avoid life insurance premium increases?


Level premiums

If you want to avoid increasing costs each year, you can choose level rather than stepped premiums. Level policies work in the inverse of stepped, meaning they're more expensive in the beginning but wind up being cheaper than stepped over time. While level premiums ideally stay the same, they may still increase with CPI depending on your policy. This feature can be turned off.


Stepped premiums

If you want your premiums to reflect the changing risk you'll pose to your insurer, you can choose stepped premiums. This type of premium structure is the most common form of premiums in Australia. When you first take out a life insurance policy, stepped is the cheaper option but becomes more expensive than level premiums over time.

More info

Want your premiums to stay the same each year? Have a look at a level premium structure.

Other factors affecting the cost of life insurance

While the above are all normal reasons that you might have seen your premiums go up, there are other factors that can influence how much you're paying for life insurance and one of the biggest is your insurer's ability to turn a profit.

Increase in mental health claims

Insurers are businesses and in order for them to remain profitable, they need to be paying out fewer dollars for claims than they are taking in premiums for their customers. Obviously, right? But in recent years there has been a major upswing in the number of claims life insurers are paying out, especially income protection claims for mental health issues.

According to a study conducted by Rice Warner, which analysed claims from 16 large super funds from 2010 to 2013, mental/stress claims were the number 1 claim type for middle-aged Australians.

Government reforms

In 2018, the government proposed some reforms as part of its "Protecting your Super" bill. Basically, those earning under a certain amount or under the age of 25 would need to opt in to insurance provided by super funds. Losing all these young and healthy members could have a massive impact on the risk pool for everyone with group insurance, with some analysts predicting up to a 26% increase in insurance premiums.

The premiums themselves

Life insurance is caught in a catch-22 of sorts: the price of life insurance goes up, which forces people to drop their policies, which forces the price of insurance up again, which forces more people to drop their policies and so on. In fact, an estimated one-third of life insurance policies are cancelled after just one month, according to

Research conducted by Rice Warner showed that over a 4-year period, life and TPD premiums increased by 215% and income protection premiums went up by 82%. However, overall life and income retail policies lost $1.5 billion over 4 years, according to APRA.

How can you keep your costs down?

A lot of what affects your premiums is out of your control, but there are some steps you can take to keep your costs down.

  • Review your needs as you get older. While many people look at life insurance as a set-and-forget product, it's important to reassess your needs as you get older. Say you've paid down your mortgage and you no longer have kids in school, those are two pretty big expenses off your plate, which means you won't need as much coverage.
  • Opting out of inflation increases. As mentioned earlier, you can opt out of automatic inflation increases for your premiums. The downside is your benefit won't be worth as much by tomorrow's dollar. However, the upside could be twofold: your premiums will be lower and you might not need to review your level of cover later in life.
  • Don't double dip on insurance. If you have a standalone life insurance policy, make sure you're not also paying for one (or more) through your super fund.

Compare life insurance policies and get a quote

Name Product Maximum Cover Maximum Entry Age Terminal Illness Benefit Claims Acceptance Rate Average Claim Time Sum Insured
TAL Accelerated Protection Life Insurance
No set limit
Not stated
Data not available
1 months
$249,285 million
Our verdict: One of Australia's leading life insurers. Automatically includes child critical illness cover. Plus, it comes with a level premium option (e.g. costs remain similar as you get older).

⭐ Current offer: Get up to 15% off your TAL Life, Trauma or TPD insurance policy for life - if you have a Body Mass Index (BMI) between 19 and 28 at the time of your application. Offer T&Cs on insurer website apply.
Medibank Life Insurance
Data not available
Data not available
Data not available
Our verdict: Medibank offers a higher payout limit ($2.5 million) than 15 other providers. Get a 10% discount if you're already a Medibank Health Insurance member.
NobleOak Life Insurance
1.1 months
$24,483 million
Our verdict: Finder Life Insurance Award winner for the last 5 years in a row. Good value for money, simple application process and a high claims acceptance rate.
ahm Life Insurance
Data not available
Data not available
Data not available
Our verdict: ahm offers a simple application process. You can be approved online or over the phone. There are no medical or blood tests needed.
RACWA Life Insurance
1.1 months
$24,483 million
Our verdict: RAC’s maximum death cover limit of $25 million is one of the highest limits you’ll find, including $5 million in TPD insurance. You can get an online quote, but you’ll need to call RAC to get trauma cover. Benefit from added peace of mind with fully underwritten insurance. RAC is also WA-based but services all of Australia.
Real Family Life Cover
2.4 months
$53,238 million
Our verdict: The application is simple; it can be done with 1 phone call and there are no medical exams. But households with larger debts may need more than a $1 million payout.

⭐ Current offer: Get back 10% of the premiums you’ve paid after 1 year.
AAMI Life Insurance
Data not available
3.1 months
$37,768 million
Our verdict: There’s flexibility with AAMI as you can add another adult to your cover, with a competitive limit of $1.5 million. Easy application process with no medical exams.

⭐ Current offer: Take out a new AAMI Life Insurance policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.
Suncorp Life Insurance
Data not available
3.1 months
$37,768 million
Our verdict: Competitive maximum cover limit of $1.5 million. Suncorp lets you change your cover amount by up to $100,000 after a big life event, such as having a baby.

⭐ Current offer: Take out a new Suncorp Life Insurance policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.

Why compare life insurance with Finder?

  • You pay the same price as buying directly from the life insurer.

  • We're not owned by an insurer (unlike other comparison sites).

  • We've done 100+ hours of policy research to help you understand what you're comparing.

Bottom line

Your life insurance premiums are going to go up whether you like it or not, which is why it helps to compare your options and speak with an adviser, as they will be able to walk you through how and why your premiums will change so you won't be caught unaware.

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