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Last Updated on 10 December 2019

11 Ways to Reduce Life Insurance

We all love saving money, but some costs just won’t budge. There’s not much you can do to reduce fuel prices at the pump, and it’s not exactly the done thing to haggle at the supermarket.

Many Aussies assume that life insurance is one of those purchases that comes with a fixed cost, but that’s not the case. There are several things you can do to lower the price of your life insurance premium without slashing your level of coverage.

Key Points
  • Non-smokers and people with a healthy BMI typically pay lower life insurance premiums.
  • Some insurers offer bonus schemes to members that translate into discounts on life insurance premiums.
  • Avoid paying extra life insurance premiums for policies you don’t know you have. Check your superannuation as default life cover is often included.

11 Ways to Save on Life Insurance
  1. Take Advantage of Bonus Schemes

Insurers are starting to realise that when members save on their life cover, everyone wins. That’s why you’ll find that many insurers are offering discounts through bonus schemes. Here are three examples of insurers helping you save:

  • AIA Vitality is a wellness program that lets you earn points through healthy living. You could get up to 20% off your premium this way.
  • Asteron Life offers a Healthy Life and Healthy Plus Option, which could save you up to 20% on life cover if you’re eligible.
  1. Get Healthy

It’s true—healthy people can save money on life insurance. Underwriters consider the insured’s Body Mass Index (BMI), smoking status, and health conditions when assessing them for life cover. The higher your BMI, the more you may have to pay in life insurance premiums. A healthy BMI is usually considered to be between 18.5 and 24.9.

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  1. Submit Your Medical Information

Some insurers will allow you to take out life insurance without submitting a medical. However, you could be paying a higher premium for this convenience, because your insurer may assume that you’re a high-risk customer. Check with your insurer to see if you could save money by submitting a medical that shows you’re in good health.

If your BMI is off but you’re healthy, a medical can also confirm this. Some people will naturally be thinner or bigger, but this does not necessarily mean they are unhealthy.

You can also submit a new medical if you lose a significant amount of weight or stop smoking for at least 12 months.

  1. Get Covered Early

Don’t delay getting life cover. The older you are when you take it out, the higher your risk and the more you’ll pay. Purchase life insurance as soon as you need it—say, when you start a family or a business— and you may be able to secure level premiums for a set period of time.

This strategy is future-proofing your premium for the length of time agreed upon with your insurer. Wait until you’re older or have diagnosed health conditions and you could be hit with much more expensive premiums. What’s more, by getting covered early you’re protecting your family’s finances in advance, not when it’s too late.

  1. Consolidate Your Policies

You may have more life cover than you realise, especially if you’ve got multiple superannuation funds. By default, many funds include various types of life cover, such as term cover or income protection insurance. That means you’re paying a premium for coverage you don’t even know you have.

What’s more, you might have taken out another policy with a different insurer! Check your super fund(s) to see if there’s any extra life cover buried in there. If you want multiple life insurance policies (for example, TPD insurance + life cover), you could get a multi-policy discount by getting them all from the same insurer.

  1. Cut the Fat

Read your Product Disclosure Statement, or PDS, carefully. You may find that there are hidden fees for features you don’t even need, such as life insurance for children, or that your premium is higher because you pay monthly rather than annually.
  1. Increase Your Waiting Period

Certain types of life cover, like income protection insurance, carry a waiting period. This is a period you’ll have to wait after a successful claim before receiving benefits, and it can be anywhere from two weeks to two years.

If you’ve got a comfortable chunk of savings to fall back on, you may be able to wait longer before receiving benefits, which could mean paying lower premiums.

  1. Reduce Your Benefit Period

You could also consider reducing your benefit period, or the amount of time your benefit is paid out after a successful claim. The shorter your benefit period, the lower your premiums. However, weigh this option carefully as you don’t want to shortchange yourself if you need to make a claim.
  1. Review Your Cover Regularly

You should review your cover at least once a year to check that your benefit still matches your financial situation. For example, if you’ve paid off your mortgage since buying life cover, you may not need the same benefit level.

It’s a good idea to check your life cover with every major event, such as buying property, having a child, or even changing jobs. All of these things could affect your risk level and benefit requirements.

  1. Step Out of the Danger Zone

You’ve probably already heard that adventure junkies usually pay higher life insurance premiums, but did you know that your job could affect your life cover as well? It’s not just loggers and miners who can be considered high risk, but roofers, electricians, and even farmers.

You don’t have to leave your job or quit your favorite activities to save on life insurance, but if you have done so, then you should inform your insurer.

  1. Shop Around and Save

It may be comfortable to stay with the same insurer for years, but you aren’t necessarily benefiting by doing so. In fact, you could save money by switching. While some insurers do offer loyalty discounts to long-term customers, that doesn’t mean you’re getting the lowest price.

Make it a habit to compare prices annually, or sooner if you experience a change to your financial situation. You can do so right now, right here.

Still have questions? Let's talk!

Confused? Not sure if this applies to your situation? Phone us on 1300 904 624 for some free, no obligation advice.

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