Cheap Life Insurance

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While it’s grim to think about, life insurance can be a useful financial safety net for your family if you’re no longer able to provide for them. From death cover to income protection insurance, there’s a range of policies available for a variety of needs. 

If you’re looking for affordability when comparing policies, you’re not alone – finding cheaper life insurance has become a top priority for many Australians. However, compromising on price can sometimes mean compromising on cover, so let’s investigate the pros and cons.

Here are some key insights into cheap life insurance.

Different types of life insurance

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Since life insurance is designed to provide for your family when you can’t, there are a few different worst case scenarios to consider. 

The basic and main level of cover is life cover (also known as “death” cover). This policy pays a lump sum to your beneficiaries when you die or become terminally ill, which could help consolidate debts, settle your finances, and provide for your family and care.

You can also customise your level of coverage by purchasing the other kinds of life insurance, too, either as optional extras or standalone policies.

  • Income protection insurance. If you’re unable to work due to illness, injury, or certain types of unemployment, income protection insurance picks up the slack by continuing to pay a portion of your salary (usually up to 70% of your pre-tax income).
  • Total and permanent disability (TPD) insurance. This policy pays you a lump sum to cover rehabilitation and living costs if you become permanently disabled. 
  • Trauma insurance. If you’re diagnosed with a major illness or injury, trauma insurance can cover care, recovery, and living costs.

How are life insurance costs calculated?

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A few different factors go into calculating life insurance premiums, but the biggest is – you guessed it – age. Insurance companies price their policies based on how likely they believe you are to file a claim, and unfortunately senior citizens carry a bit more risk. Because of this, most providers won’t let you take out a new policy once you’re over 70 years old, though existing policies can usually be renewed well into your 80s or 90s (depending on the limits). 

Other considerations that could impact your premium include things like:

  • Your living costs. How much would your family need to keep going without your salary? 
  • Your gender. Depending on the gender you were assigned at birth, you may be prone to certain health risks. 
  • Your hobbies, occupation, and lifestyle. Amateur skydivers, we’re looking at you. Your insurance provider will likely ask questions about how you pass the time to gauge your level of lifestyle risk. 
  • Your health history. Even young people aren’t immune to chronic conditions, so if your medical history negatively impacts your work ability or life span, your premium could reflect the additional risk. Always be as truthful as you can about your medical history to your provider, including your family’s medical history (if they ask for it). You may be required to provide details either by submitting a personal declaration or a medical exam report from a qualified health professional. 
  • Your relationship status and beneficiaries. Single people with no children may not necessarily need life cover, but may want to consider TPD or income protection insurance. 
  • The value of your assets. As you acquire heritable assets, like a super fund, investment properties, vehicles, jewellery, shares and deposits, etc., life insurance becomes all the more necessary – and all the pricier.  You should also take into account how much money your family would receive anyway from just your super, bank accounts, and other heritable assets, as this may affect any lump sums you could receive.
  • How you’re buying the policy. Whether you’re buying the policy through your superannuation fund or as a standalone policy can impact how much you pay. 
  • How long you’ve had the policy. Life insurance premiums tend to uptick with each passing year of coverage (called “stepped premiums”), so keep this in mind when comparing life insurance quotes. If you take out a policy with a “level premium”, your premium will likely be higher up front but kept the same until a certain age, which can slow down the price growth. Your policy may also be indexed yearly based on the Consumer Price Index to protect its value from inflation. 
  • Compulsory costs like admin fees, stamp duty, and GST. Standard fees may apply regardless of provider, unfortunately. You generally won’t be able to claim any life insurance premiums on your taxes, either. 

Luckily, knowing what’s influencing your premium can help you make an informed decision about which cheap life insurance policies offer you good value – and which don’t. Consider how much coverage you need as well as any risk factors when comparing life insurance quotes; this will clue you into whether you could be getting good value for money. 

And don’t forget to read the product disclosure statement (PDS), too!

What isn’t covered with cheap life insurance?

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While a basic life insurance policy (sometimes called “term life insurance”) may be cheap, it usually won’t come with as much coverage as a comprehensive one. 

For example, here are some common exclusions to watch out for in cheap life insurance policies:

  • Extras like trauma, TPD, or income protection cover. Not having the right level of coverage could leave your family financially vulnerable while you’re still of working age. 
  • Claims associated with COVID-19. Because the long-term health effects of SARS-CoV-2 are not well understood, coverage for complications or “long COVID” may not be covered. Check with your provider and read the PDS to see if COVID cover is included. 
  • Inability to increase your cover. If you opt for a cheap policy, you may get locked out of increasing your cover due to health conditions or other issues down the line. Make sure your policy includes some flexibility, such as expandable limits after major life events like the birth of a child or taking out a home loan

There are some other general exclusions to keep in mind, too, that won’t be covered by life insurance no matter the price. These can include:

  • Mental illnesses like depression or anxiety.
  • Accidental death or injury occurring while under the influence, acting recklessly, or breaking the law. 
  • Incarceration. 
  • Preexisting injuries or illness. 
  • Self-injury or suicide*, especially within a certain time period of taking out your policy.
  • Normal pregnancy, miscarriage, or childbirth without complications (including IVF). 
  • Wars or acts of war. 

For a complete list of a policy’s benefits, exclusions, and definitions, make sure to thoroughly read the PDS.

*NOTE: If you are struggling with thoughts of self-injury or suicide, help is available. Call Lifeline at 13 11 14 for 24/7 crisis support or head over to our resource guide for more options. If it is an emergency, call 000.

Can you get cheap life insurance without a medical examination?

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Life insurance providers may ask for you to undergo a medical examination with a qualified health professional so they can gauge your health, determine your cover eligibility, and adjust premiums accordingly. This is known as “medically underwritten” life insurance. 

However, some life insurance providers will accept your application without a medical examination (called “no medical” life insurance). Just keep in mind this may escalate your premium or exclude you from benefits like trauma or TPD cover, so carefully read the PDS before pouncing on a policy.

Who is eligible for cheap life insurance?

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Different life insurance providers will have different eligibility criteria for taking out a policy. So long as you meet their terms and conditions for coverage, you may be eligible to take out a cheap life insurance policy as a basic measure. 

Two big caveats, however: your coverage may be limited if you opt for the cheapest life insurance, and what’s cheap now might become more expensive later. Consult the PDS for more details about your level of cover and any eligibility criteria.

Is cheap life insurance best for me? Cheap vs. expensive life insurance

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When making important financial decisions, especially for your family’s financial security, it’s vital to seek consultation with a registered financial advisor and do as much research as possible. One life insurance policy will not necessarily suit (or be cheap for) everyone, so it’s ultimately up to you to decide what’s right for your family and situation. 

For example, cheap life insurance might suit someone who:

  • Is relatively young and healthy.
  • Works a relatively low risk job.
  • Has assets to protect such as property, shares, and other deposits.
  • Has other insurance policies in place, like private health insurance, that can cover costs. 

On the other hand, expensive life insurance may not offer you the best value for money, either. The right life insurance policy will fit snugly within your budget while offering your family financial protection down the track. 

For further reading, feel free to head to our life insurance hub for tips, tricks, and insights into comparing policies.

Who has the cheapest life insurance

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Unfortunately, no single life insurance provider offers the cheapest policy for everyone. Premiums vary widely depending on your risk profile and level of cover, so the same policy might be cheaper for one person than another. 

However, there are a few 2022 award-winners recognised by our expert judges and your fellow Aussies as offering some of the best value around. For more details, feel free to check out our best life insurance hub.

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FAQs

Why should I get life insurance?

Life insurance can offer financial protection to you and your family if you’re no longer able to support them. For instance, it could help cover living expenses if you become too sick or injured to work, or pay for hospice care if you get diagnosed with a terminal illness. After your death, life insurance can also step in to clear debts (like credit cards or a mortgage) or pay for funeral expenses. 

Not everyone may necessarily need life cover, but there are other kinds of life insurance, such as trauma or income protection insurance, that could help support you if you lose the ability to work.

When’s the best time to take out life insurance?

Life insurance premiums, whether they’re stepped (increasing yearly) or levelled (fixed at a higher upfront price) will get more expensive as time goes on. However, the younger and healthier you are, the more likely it is you’re eligible for a cheaper life insurance policy at the start. 

Most providers set age limits on when you can take out a new life insurance policy, usually between 16 and 69 years old. Life cover can also usually be renewed well into old age, but other packaged coverage options like trauma or TPD insurance will be capped between 70 - 80 years of age. 

So when’s the ideal time of life to buy life insurance? Depends on the person. However, no matter the age, people with partners, dependents, or important assets like property may want to consider life insurance as an option for protecting their family’s finances.

How do I find cheap life insurance? Can I do it online?

No one provider offers the cheapest insurance, since premiums depend on a variety of factors. Comparing as many life insurance quotes as possible can be a great place to start, since it will give you a clearer idea what level of coverage you’re eligible for and the price range available to you. 

Many (if not most) modern life insurance policies can be compared or purchased online, too. For those hoping to eliminate some of the hassle, comparing life insurance quotes online can be a great way to cast as wide a net as possible.

Can I get life insurance with my super fund?

Yes! Most Australian superannuation funds will offer different life insurance policies, from life cover to income protection insurance, as part of their services. Some will even do it automatically (though if you’re under 25 or have a super balance below $6000, you may not be eligible). 

Taking out life insurance through your super can come with a few advantages, too. For instance, your premiums may be cheaper and more tax effective than a standalone policy (since employer salary sacrifice and super contributions are taxed at 15%). Additionally, the provider may not require as many health checks for policies purchased through a super. However, these kinds of policies can reduce your super balance and come with limited cover, so it isn’t all pros. 

Consult a tax professional or financial advisor if you’re unsure what could work best for you.

Is life insurance tax deductible?

According to the Australian Taxation Office (ATO), most forms of life insurance aren’t claimable on your taxes. However, you may be able to claim a deduction for income protection insurance premiums against the loss of employment income. You must also include any payments received from your income protection policy in your tax return. Consult a tax professional if you’re unclear what to report or claim.

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