Cheap Life Insurance

Key Points

• Life insurance premiums vary based on your risk factors.
• There are ways to keep the cost of your premium down, but some may impact your coverage.
• Getting different quotes is key to sussing out good value life insurance.

While it can be tricky 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.

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.

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!

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.

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.

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.

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.

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 2023 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.