Life Insurance - Pay Less For More Cover? Save by getting cheaper premium quotes

General wisdom would suggest that the greater the value life insurance you purchase the more you would have to pay but this is not necessarily the case. In fact, you could actually end up paying less for more cover. This may seem to defy logic initially but CANSTAR CANNEX has investigated and confirmed this phenomenon exists across the life insurance industry to help you get more bang for your buck.

Life insurance companies charge a base premium for each $1000 of insurance cover sold. Individual factors such as smoking and age add to this base premium while other factors such as the total amount being insured may actually decrease the base premium.

Most life insurance companies have special discounts which are applied to the base premium at different cover levels (eg $250,000, $500,000 & $1,000,000). Each company has different discounts (ranging from 0% - 43% in some cases) which are triggered at different threshold amounts. Whenever a new discount threshold has been reached, the new discount applied to base premium can be enough to offset the increased cost of the higher level of cover being purchased.

Table 1 below highlights this phenomenon.

CANSTAR CANNEX used life insurance quotes for 7 different cover levels from 14 major life insurance companies. The premiums were then averaged to provide the results shown below.

This exercise highlighted 2 major thresholds, the first at $250,000 and the other at $1,000,000 cover where the discount applied results in cheaper premiums for consumers buying the insurance.

So what does this mean for the average consumer? Buying life insurance involves talking with your financial adviser and deciding the amount of cover you need to maintain the lifestyle you would like your loved ones to have. If your needs analysis comes up with a value that is just shy of one of these thresholds it may be worth rounding up that number to the next $100,000 and asking how much that would affect your premiums. Even if the premiums aren’t less, the increase may be so small that you’ll be getting a better deal.

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