How Much Does Life Insurance Cost?

Understanding how your premiums are calculated

Life insurance premiums are based on many different factors and may be re-evaluated every year due to a number of factors including indexation of the benefit amount or any fee changes. Premiums are also adjusted to reflect the risk of insuring you. This means that if you take out cover at 55 years of age, your premiums may be different by the time you are 70 depending on whether your policy is a level or stepped premium.

If you’re worried about your premiums becoming too expensive, you should ask your insurer about their premium adjustment rates. This will help you compare the long-term cost of each policy.

Here is a closer summary of the different variables which affect the cost of life insurance:

Age

Unfortunately, the older we get, the more likely we are to experience an event that initiates the option to make a claim (like passing away). 

To offset this risk, life insurance providers will adjust your premiums each year you are covered, to account for getting older. Most insurers also have maximum entry age requirements for new policyholders, which is why it’s important to consider getting cover while you are still able.

Health

Insurers will ask about your current health as well as any past medical conditions you have experienced. Premiums may be adjusted based on the risk of insuring you. You may also be asked to undergo a medical exam or blood test to confirm your health. Every insurer has their own set of questions and criteria, but it’s unlikely that you will be asked about common flu or headaches.

For those of us who are worried about intrusive medical tests, when you apply for Seniors Life Insurance, you’ll only be asked eight questions about your health over the phone.

Gender

You may be asked about your biological gender when you apply for life insurance as premiums could be adjusted based on any risk factors that relate to this.

However, every insurer has their own process for calculating premiums so the price of your policy may not be affected by your gender.

Lifestyle

Depending on the insurer’s needs, your premiums may be adjusted according to any personal risk factors in your life, such as your occupation or smoking status. Unsurprisingly, smokers can expect to pay a higher premium than non-smokers due to the known health risks of cigarettes. This is where those smart health decisions we’ve been making can pay off.

Your cover amount

Part of the reason it’s so important to choose a suitable cover amount is because the level of cover you take out will make a difference to your premiums. A higher cover amount means more financial assistance for your loved ones after you pass away, but you’ll need to make sure the cover amount you choose doesn’t make your premiums unmanageable.

However, it’s also important to be mindful that Australians are increasingly under-insured⁵. This means they don’t have enough cover for their expected needs.