Wondering how to find cheap life insurance in Australia? This guide provides you with a simple checklist so you can secure affordable coverage and get the most value out of your dollar.
Always start off with a strategy
“If I pass away or am injured and not able to work again, I want the mortgage to be paid off. I also want the fees for my kids schooling to be looked after so they don’t need to move around.”
Whilst this is just an example, starting off with a simple statement of what you want to happen if you were to pass away allows you to not only determine how much cover you might need now, but also in the future. Being clear on the outcomes you are covering for will allow you to confidently adjust your cover over time so that you are not paying any more cover and hence premiums than you need to.
Using the above example, as of July 2024, the average mortgage in Australia is $641,000.
The average cost of schooling over 13 years for a public school as of 2024 is $92,170 and I have 2 children.
Simply, this means I need $641,000 + $92,170 + $92,170 = $825,340 to ensure my wishes are possible.
In my example, because mortgages are generally paid down and as kids get older, the amount of insurance cover I would need in this example would decrease. As the amount of cover you have is directly correlated to your premium, not having more cover than you need also means not paying more than you need.
Having a clear strategy is critical in helping reduce the total amount of insurance premiums you pay not just now but over the long term.
Understand the channel you are purchasing cover through
There are four channels you can purchase Life Insurance Products. The same insurer can offer different products through different channels so be aware of the differences as there significant premium differences.
Their general characteristics can be summarized below:
- Direct Life Insurance – This is when you purchase a policy directly with an insurer. Generally these products are simplified with less options and have a shorter application process but come with pre-existing condition exclusions. They are often the highest cost channel to access life insurance products. Examples of providers include Zurich EziCover and NobleOak.
- Retail Life Insurance – Available via Financial Advisers and Life Insurance Brokers, these products have the greatest amount of flexibility allowing you to structure your policies via super or your SMSF if you wish. Due to the relative complexity and customisation available, they are not available directly to public. Retail Life Insurance is often the lowest cost. Examples of providers include Zurich Wealth Protection, NEOS, Encompass, MLC, ClearView, OnePath and TAL.
- Group Life Insurance – Available directly through your super fund. Super funds will use a single insurer to offer a product for all their members, for example, insurance cover through Australian Super is issued by via TAL. This provides a simple solution to ensure coverage is available for as many members as possible. Some options such as Trauma cover and ‘Own Occupation’ TPD are not available via Group Insurance policies.
- Employer Life insurance – Some employers will offer life insurance products as part of a remuneration package. Sometimes coverage is provided to employees up to certain limits with all costs paid by the employer. If you have employer sponsored cover, it’s worthwhile being clear on what is covered to see if its sufficient for your circumstances.
Compare Life Insurance Quotes
Always get quotes from multiple insurers to ensure you are getting the best value. Life insurers have a ‘sweet spot’ where they will be most competitive for clients of a certain occupation, age and pre-existing condition history (if applicable).
As such it is not uncommon to see price variations of 30-40% between insurers for the same level of cover.
It’s also important to ensure that the benefits that are being compared are the same as there are a range of benefits which are available as either built-in features or extra cost options. For example, many Life Insurance policies willl offer a ‘buy back’ option if purchased together with TPD cover. This buy back option is in-built with some insurers and an extra cost option for others.
Utilizing online comparison tools or seeking the services of a broker will also help you avoid high-pressure sales tactics which can occur when dealing with an insurer directly. Brokers will use tools to help you compare life insurance quotes easier by comparing not just price but quality in terms of inclusions, exclusions, and limitations across across policies.
Additionally, evaluating customer reviews and claims statistics are important. As of December 2023, the average claims acceptance rates for all insurers for Life insurance was 90.7% when purchased directly with an insurer and 97.4% when purchased through a financial adviser or life insurance broker.
Consider cover at Younger Age
Generally, the earlier you consider cover, the more options and control you will have over your cover and your premiums.
Life insurance premiums are based off mortality and claims rates. In general because younger people tend to be in their healthiest stage of life, their life insurance premiums are also generally lower.
Cover also needs to be applied for and different insurers will assess pre-existing medical conditions differently. Considering cover before accidents happen or you develop any pre existing medical conditions will ensure you have as many insurers available to choose from as possible.
Most insurers will also offer two premium structures. This is chosen when you take out your policy and cannot be changed for the life of the policy.
- Stepped Premiums – your premium cost is linked to your age. As such they will generally ‘step’ up each year when your policy renews.
- Level Premiums – the age variable for the initial level of cover you take out is locked in. You will generally have higher initial premiums but they can become more competitive over time.
Note that the naming for Stepped and Level Premiums will change to ‘Age Stepped Variable’ and ‘Variable’ respectively as of 31st December 2024.
By considering cover earlier, you will the option of locking in a lower premium over the long term if it is part of your overall financial strategy.
To obtain projections based off your situation, it’s important to conduct a quote comparison and consult professionals such a financial adviser or life insurance broker.
Impact of Sum Insured on Rates
The sum insured—or the total amount of coverage—has a direct impact on life insurance cost. As the sum insured increases, so does the cost of the policy.
Insurance providers calculate premiums based on the cost per $1,000 of coverage. In general, if you double your cover, you’ll see your cost double and vice versa.
Factors such as age, BMI, pre-existing medical condition history and smoking status also play a role in determining rates.
Selecting the right sum insured requires balancing the coverage amount you need with the premium cost you can afford.
Choose the Right Type of Life Insurance Products
Choosing the right type of life insurance policy ensures you get the best coverage for your needs and are only paying for what you need. In Australia, there are four types of Life Insurance products.
Life insurance (Death cover): Pays a lump sum to your loved ones if you pass away or are diagnosed with a terminal illness (12-24 months life expectancy, depending on the insurer). This provides financial security to help cover ongoing living expenses.
Total and permanent disability (TPD) Insurance: Provides a lump sum payment if you’re permanently disabled and can no longer work.
Income Protection Insurance: Replaces up to 70% of your income through monthly payments after a waiting period if you’re unable to work due to illness or injury. Continues to be paid until you return back to work or until the end of a benefit which you choose.
Critical illness insurance (Trauma insurance): Offers a lump sum if you’re diagnosed with a covered illness like cancer or stroke, helping with medical and living costs. Payment depends on meeting severity criteria outlined in the policy.
Choosing only the coverage that is relevant to you will ensure that you can meet your strategy in a cost effective manner. For example, if you don’t have dependants or a partner and don’t need additional funds to be made available if you pass, then Death cover may be less important to you. Instead, you can focus your costs onto Income Protection or Trauma insurance where you may see more value.
Leverage Multi-Policy Discounts
Bundling your life insurance policy can be an excellent way to lower your life insurance premiums. Most retail insurers offer discounts of up to 15% on Death, TPD and Trauma policies when purchased together.
Bundling policies also makes sense from a claims administration perspective. At a time of high stress, it’s generally much easier only working with one insurer instead of multiple. Having representation from your Life Insurance broker, financial adviser can also save stress as they will be able to advocate on your behalf and help with claims requirements.
BMI and Lifestyle Discounts
Some insurers will offer healthy lifestyle discounts to individuals who fall within a BMI range. Whilst BMI is not the perfect measure of body composition, some insurers will use it to apply discounts of up to 15% on Death, TPD and Trauma policies if you BMI is between 19-28 inclusive.
Some insurers such as AIA will also offer discounts for using fitness tracking devices to monitor physical activity or participating in wellness programs and health assessments.
Annual vs. Monthly Payments
Opting for annual or monthly payments for life insurance premiums can impact overall costs. Annual premiums will come at a 6-8% discount as compared to monthly premiums, which can lead to considerable savings on Life Insurance premiums over time.
Consider Life Insurance Through Superannuation
Using a retail insurer which allows for your Life Insurance to be owned via super can be a cost-effective option of obtaining life insurance. Insurers receives a tax benefit equal to 15% of your premiums when you choose to pay for your policies via a rollover.
They generally fully pass on this benefit to you in the form of a rebate allowing you to reduce your payable life insurance premium by 15%. This rebate is available for Life, TPD and Income Protection policies and can be attractive as it allows your to preserve your cashflow as well.
It’s important to note that your superannuation is for the purpose of funding your retirement so purchasing products through your super will have an impact on your final retirement balance.
Why Use a Broker Over Direct to an Insurance Provider?
Using a broker instead of going directly to an insurance provider offers several advantages:
- Access to Multiple Options: Brokers work with multiple insurers, giving you a broader range of policies to choose from. This means you’re more likely to find coverage tailored to your specific needs and budget.
- Personalised Advice: Brokers provide expert, unbiased guidance, helping you navigate the complexities of life insurance. They assess your individual situation and recommend policies that offer the best value and protection.
- Better Deals: Brokers often have access to exclusive deals and discounts that may not be available directly through insurance providers. They can help you find competitive rates, potentially saving you money.
- Time-Saving: Instead of comparing multiple insurance providers on your own, a broker does the legwork for you. They simplify the process, making it faster and more efficient to find the right policy.
- Ongoing Support: A broker provides continuous support, not just when you’re choosing a policy but throughout the life of your coverage. They can assist with claims, policy updates, and renewals.
Summary
Securing affordable life insurance in Australia requires a strategic approach. Considering cover early, comparing quotes, selecting the right policy type and structure can all contribute to cost savings. Maximising multi-policy discounts and choosing the right payment method are also key. You can further reduce costs by exploring coverage through superannuation, and regularly reviewing your policy to ensure it meets your evolving needs.
By implementing these strategies, you can find the most cost-effective life insurance that provides comprehensive financial security for your loved ones. Take the first step towards protecting your family’s future and explore tailored solutions at WeLifeInsure. Proactive planning today ensures significant savings and peace of mind for tomorrow.
