Cost Of Life Insurance In Australia

The cost of life insurance varies according to the type of policy.

Premiums can vary significantly. The government’s Moneysmart website has a life insurance calculator to help you determine what you can expect to pay.

By way of a guide, a non-smoking female in her twenties will pay the lowest life insurance premium. The average cost is around $28 per month. A non-smoking male also in his twenties will pay approximately $47.

At the other end of the scale is a male smoker in his fifties—he will pay $496 per month. The female equivalent will pay $338.

Life insurance can be purchased from within your superannuation fund or via a financial advisor, as well as directly from an insurer. Some types of insurance are only available from financial advisors. Life insurance that is purchased from a financial advisor is tax deductible, however it will likely also cost more.

Super funds typically offer three types of life insurance for their members: life cover, TPD insurance and income protection insurance.

Most super funds automatically provide life cover and total and permanent disability (TPD) insurance, and some will also automatically provide income protection insurance.

Death Cover

Also known as life cover, this kind of policy will pay out a lump sum when the policy holder passes away.

TPD Cover

This kind of life insurance is activated if the policy holder faces total and permanent disability (TPD). The lump sum goes towards rehabilitation and living costs.

Terminal illness cover

This kind of policy will provide a payout before a person with a terminal illness dies. It usually follows a diagnosis of having less than 24 months to live. Many life insurance policies come with terminal illness cover, or have an option to add it on.

Related: Noble Oak Premium Life Insurance Review

The cost of the monthly premium for life insurance will vary according to factors that include age, gender, occupation, medical history and lifestyle choices. Someone who smokes cigarettes will pay a higher premium than someone who doesn’t, for the obvious reason that smoking causes cancer.

Men have higher mortality rates than women on average, so premiums are typically higher.

The other factor affecting price is the level of cover taken out.

The best way to lower the cost of your life insurance premium is to only pay for what you need. Most policies don’t update automatically as changes take place in your life, so reread the policy terms every few years. Cancel or amend aspects of your policy that are no longer needed.

For example, your children may now be adults and are no longer financially dependent on you. If this is the case, you could reduce the payout amount, which will reduce your premiums. The same would apply if you have moved to a smaller home with lower maintenance costs.

If you have reduced your alcohol intake or quit smoking, it is worth telling your insurance company. If you are willing to prove how healthy you are by going through the medical examinations or health checks, it will likely save you money over the years.

If you do not have a partner, children or other dependents, you may not need life insurance. A single person may prefer to take out income protection or total and permanent disability cover, as these will provide financial security in the event that you can no longer work due to sickness or serious injury.

In Australia, 15 million people out of a total of 26 million have some kind of life insurance cover. Many policy holders are underinsured, a report for the Financial Services Council notes.