How much does life insurance cost?

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 its cost.

What does life insurance cost?

The cost of life insurance depends on a variety of factors that can include your age, your gender and whether or not you smoke. 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 about $35.39 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 approximately 30% more ($45.99 a month on average) 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 $32.70 $52.57 $48.37 $77.62
Thirties $35.39 $59.23 $45.99 $84.38
Forties $63.57 $117.92 $79.36 $164.43
Early fifties $122.59 $224.96 $163.89 $332.42
Late fifties $203.85 $356.18 $301.61 $582.41

Source: Prepared on 14/12/2020. Based on quotes obtained for Canstar’s 2020 Direct Life Insurance Star Ratings (June 2020).

A recent survey by insurance provider NobleOak found that cost is the most significant factor for Australians buying life insurance. Of the 1,000 respondents, 79.5% said the cost of the premium was one of the most important factors. This was ahead of product features (58.5%), claims reputation (58.3%) and service levels (30.8%).

However, 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 (for example, whether you bundle your life cover with 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 shave money off your monthly life insurance premium. For example, according to Canstar’s research, a non-smoking female in her 40s could save $28.47 a month 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 gender
  • 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 a variety of providers could be a good place to start. Some life insurers offer discounts and other special offers to new customers. 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 could be worth checking you are not unnecessarily doubling up on your cover, or even being classified as a smoker by mistake.

Dangerous occupations or risky hobbies are often red flags to insurers. Avoiding career and lifestyle choices 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, with truck drivers and electricians paying the highest premiums, registered nurses and checkout operators paying moderate premiums and accountants and receptionists benefitting from the lowest average direct income protection 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 $60.40 $76.00 $45.81 $57.58
Car mechanic $112.83 $142.58 $82.66 $104.34
Checkout operator $97.49 $122.12 $73.83 $92.43
Chef $102.13 $128.74 $73.98 $93.10
Clerk $64.61 $81.31 $48.47 $60.94
Commercial cleaner $107.87 $135.14 $81.34 $101.88
Electrician $112.83 $142.58 $82.66 $104.34
Receptionist $64.61 $81.31 $48.47 $60.94
Registered nurse $94.83 $120.09 $67.83 $85.80
Retail manager $65.82 $82.83 $49.32 $62.00
Sales assistant $70.27 $88.40 $52.60 $66.10
Sales representative $66.83 $84.10 $50.28 $63.19
Secondary school teacher $77.01 $97.25 $54.24 $68.36
Store person $82.26 $103.38 $62.98 $79.08
Truck driver $124.76 $156.38 $94.26 $118.11
Waiter $102.19 $128.00 $77.69 $97.26

Source: Prepared on 14/12/2020. Based on quotes obtained for Canstar’s 2020 Direct Income Protection Insurance Star Ratings (March 2020). *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 shave a considerable amount of money off your life insurance premiums, in addition to any health insurance costs.

Smoking can double life insurance premiums

Based on recent Canstar research, smokers can expect to pay 81% more than an equivalent non-smoker for direct life insurance, and 26% more than an equivalent non-smoker for direct income protection insurance on average. Older males in particular are hit with a higher premium ‘loading’ (or surcharge) for lighting up, and many insurers consider the use of other tobacco products, including nicotine replacement therapy and e-cigarettes, as smoking for insurance purposes.

If you were a smoker when you signed up for life insurance and have since quit, 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).

Additional reporting: Jacqueline BeleskyThis article was reviewed by our Sub Editor Jacqueline Belesky before it was updated, as part of our fact-checking process.

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