How much does life insurance cost?

TAMIKA SEETO
Life insurance can give you and your family financial peace of mind if something were to happen to you. If you’re thinking about buying life insurance, one important factor to consider is the cost.

What does life insurance cost?

The cost of life insurance depends on a variety of factors that can include your age, sex, whether or not you smoke and how much insurance you are taking out. Typically, males will pay more for life insurance than females. For example, according to Canstar’s research, a non-smoking woman in her 30s would pay $34 per month on average for a direct life insurance policy with a benefit of $500,000. In comparison, a non-smoking man in his 30s would pay $46 a month on average, about 35% more for the same amount of cover, based on the policies considered in our latest Star Ratings.

To give you an idea of life insurance costs for men and women of different age groups and smoking statuses, Canstar has calculated the average monthly premiums across the life insurance providers we rate.

Average monthly direct life insurance premiums

$500,000 sum insured
Age Female Male
Non smoker Smoker Non smoker Smoker
Twenties $32 $54 $48 $84
Thirties $34 $61 $46 $88
Forties $64 $124 $80 $165
Early fifties $122 $236 $162 $330
Late fifties $213 $395 $300 $593

Source: www.canstar.com.au. Based on quotes obtained for Canstar’s 2021 Direct Life Insurance Star Ratings (May 2021).

It’s important to note that price isn’t everything. If you do decide to take out life insurance, you might also like to consider the type of life insurance available (e.g., whether you bundle your life cover with total and permanent disability (TPD), trauma or income protection cover), the level of cover, and whether any exclusions apply.

If it looks like you may be paying too much for your life insurance, or you think you’re not getting enough coverage for your premiums, it may be time to shop around.

Canstar’s Direct Life Insurance Star Ratings compare both the cost and features of the direct life insurance products in our database. By choosing a 5-Star rated product, you may be able to save money on your monthly life insurance premium. For example, according to Canstar’s research, a non-smoking female in her 30s could save $14.84 a month (or $178.08 a year) on average by choosing a 5-Star rated life insurance policy, compared to a non-5-Star rated policy.

If you’re comparing life insurance policies, the comparison table below displays some of the policies currently available on Canstar’s database for a 30-39 year old non-smoking male working in a professional occupation. Please note the table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical) and features links direct to the providers’ websites. Use Canstar’s life insurance comparison selector to view a wider range of policies.

What factors can affect life insurance premiums?

The cost of life insurance typically depends on a range of factors, which can include:

  • your age
  • your sex
  • your smoking status
  • your current health and medical history
  • your occupation and any associated risks
  • your personal pastimes and hobbies
  • how you purchase your cover (e.g. directly from an insurer, via a financial adviser or as part of your superannuation)
  • the type of cover you get. For example, if you bundle life cover with TPD, trauma cover or income protection.
  • the amount of cover you take out. You might like to use Canstar’s Life Insurance Calculator to get an estimate of how much cover you may need.

Your insurer may give you the option of choosing between stepped or level premiums. Stepped premiums increase each year as you age and become statistically more likely to make a claim, while level premiums stay the same over time, but may be more expensive to take out initially.

How can you make your life insurance premiums cheaper?

If you’re looking for ways to manage the cost of your life insurance, shopping around and comparing products from a variety of providers could be a good place to start. Some life insurers offer discounts and other special offers to new customers. For example, you might be able to get a discount if you pay your premiums annually instead of monthly, or if you take out a joint policy. It can also be a good idea to review your policy to make sure the level of cover you have is suitable for your specific situation and you’re not paying for more than you need.

It’s also important to check what insurance you already have through your super. Many funds automatically provide members with death and TPD cover, so it’s worth checking that you are not unnecessarily doubling up on your cover.

Dangerous occupations or risky hobbies are often red flags to insurers. Avoiding career and lifestyle choices that are viewed as risky may help reduce monthly life insurance premiums, but this may not be a suitable option for you personally. Canstar has researched average monthly direct income protection premiums for a person in their 30s (smokers and non-smokers, and males and females) across occupations. Professional/white collar workers (such as accountants and receptionists) pay the lowest premiums, and heavy blue collar workers (such as truck drivers, car mechanics and commercial cleaners) pay the highest premiums, on average.

Average monthly direct income protection premiums

Person in their thirties*, monthly benefit of $3,125
Occupation Female Male
Non-smoker Smoker Non-smoker Smoker
Accountant $65 $82 $49 $62
Car mechanic $123 $156 $88 $112
Checkout operator $109 $137 $82 $102
Chef $109 $138 $77 $97
Clerk $70 $88 $52 $66
Commercial cleaner $120 $150 $89 $111
Electrician $123 $156 $88 $112
Receptionist $70 $88 $52 $66
Registered nurse $112 $142 $79 $100
Retail manager $72 $91 $54 $67
Sales assistant $78 $98 $58 $73
Sales representative $73 $92 $55 $69
Secondary school teacher $88 $111 $61 $77
Store person $82 $104 $62 $78
Truck driver $128 $161 $94 $118
Waiter $109 $137 $82 $102

Source: www.canstar.com.au. Based on quotes obtained for Canstar’s 2021 Direct Income Protection Insurance Star Ratings (March 2021). *Premiums based on quotes for a sample of ages within the thirties age group: 32 and 37.

If you’re a smoker and you are able to quit, this could reduce your life insurance premiums considerably, in addition to any health insurance costs.

If you’ve kicked the habit for good, consider contacting your life insurance provider to ask them how to change your smoking status to non-smoker. Keep in mind that an insurance company will generally consider you a non-smoker if you have not smoked in the last 12 months. This can vary between insurers, however, so you may want to check your PDS or speak to your provider to confirm. There can also be consequences for not disclosing to your insurer that you smoke, even socially.

If you’re looking to take out life insurance, you can compare a range of direct life insurance products on Canstar’s database:

Cover image source: altanaka/Shutterstock.com

Additional reporting: Jacqueline Belesky


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