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Last Updated on 21 August 2019

How Much Does Life Insurance Cost?


Life insurance is an important investment in protecting your financial security in the future. If you pass away, you do not want your family members to be left without the funds they need to pay housing costs, educational expenses, and other bills to maintain their quality of living.

If you become unable to work or have a critical illness, you also do not want to face financial ruin or be forced to try to keep working even with serious health problems. A life insurance policy with a death benefit, critical illness cover, total and permanent disability cover, and income replacement insurance can protect you from these financial disasters – but you need to pay for a policy before you get sick.

While it is a smart choice to purchase life insurance, you may be concerned about the cost of coverage. The good news is, you can usually get life insurance for little or nothing out of pocket.

How much does life insurance cost?

The cost of life insurance varies from person to person. A 34-year-old male who does not smoke who obtains a $100,000 policy, for example, could pay under $3 per week for coverage while someone who has a higher death benefit or who is older or who smokes could expect to pay more. Because there are different variables affecting the cost of life insurance cover, you will need to get a personalised quote in order to determine what your policy should cost you.

What factors determine how much life insurance costs?

Factors that determine the cost of life insurance include your age at the time you obtain your policy; whether you smoke or not; certain pre-existing medical conditions; the types of coverage you wish to obtain; and the amount of coverage that you wish to obtain.

You can expect to pay more for a higher benefit amount and different types of life cover. For example, term life insurance for $300,000 will be cheaper than term life cover for $300,000 and trauma insurance for $100,000.

Those who have smoked any nicotine products in the past 12 months will see an effect on their premiums. However, any loading will be removed if you’ve stopped smoking for 12 months or more.

Typically with life insurance, the older you are, the more you’re likely to pay. This is related to how insurers determine your risk. However, certain insurers will place less value on age when determining your premium than others. Additionally, some insurers have programs that will offer discounts on the price of your premium if you meet certain health requirements.

Will the cost of a policy change over time?

There are different ways that you can structure your premiums and these decisions will impact the way that your policy changes over time. The most common options are stepped premiums and level premiums.

If you purchase coverage with stepped premiums, premiums increase gradually as you age. Most people opt for a stepped premium policy because they get more affordable coverage when they are young and their incomes are lower. A stepped policy also means you pay for the specific level of risk associated with your age at the time of coverage.

If you buy a policy with level premiums, on the other hand, your premiums will remain constant instead of increasing with your age- usually until you are 65. This gives you the security of knowing what you will be paying for coverage in advance. While the initial outlay may be higher than a stepped premium, there are long term savings gains that can be made.

Will you pay more for a policy if you smoke?

You can expect to pay more for a life insurance policy if you smoke cigarettes. The life insurer may request you undergo a medical examination to determine if you have any conditions or complications associated with smoking. If you quit smoking and buy coverage, you usually will be given the same rate as a non-smoker as long as at least 12 months have passed since you stopped using cigarettes.

Do pre-existing conditions raise the cost of a life insurance policy?

While the amount varies, you can expect to pay more if your pre-existing condition increases the risk of death of illness. You can speak to one of our licensed advisers for a free medical pre-assessment to determine how your condition will affect your insurance.

Will seniors pay more for life insurance?

Life insurance gets more expensive the older you get, because there is a greater risk that you will get sick or pass away. There are insurers that cater policies towards seniors and you may wish to get quotes from these providers to determine if the costs are lower.

Does life insurance cost the same amount from different insurers?

Different insurance companies charge different premiums even for the same individual and the same level of coverage. Because there can be substantial differences in costs, it is important to comparison shop to try to find the best deal. However, you should not decide on coverage based solely on price. Be sure to compare the terms and conditions of the policy, the benefits amounts, and what the policy covers, so you can get the overall best deal.

Can I avoid paying out-of-pocket for life insurance?

You may be able to buy most types of life insurance coverage from the money in your superannuation fund. This means you can avoid paying anything out-of-pocket to get coverage. You may also be eligible for a 15% rebate if you pay for your cover through a retail super fund.

Can I afford life insurance?

Because life insurance is low-cost when you are young, it is a good investment to buy it and you will not need a lot of money to purchase a policy. Since you can generally pay for life insurance out of your super fund, you may not have to reduce your other spending or do anything at all to find room in your budget for a policy.

Even if you do decide to pay for the policy directly, making an investment in a life insurance policy is smart financial planning. You cannot afford not to have life insurance if you are dependent upon your income and need to have money coming in if you become disabled or are critically ill. If you have any family members depending upon you, you also need to have a policy to protect them. Shop around today to explore options for affordable coverage so you can make sure you and those you care about are provided for.

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