5 Tips to Reduce Your Life Insurance Premiums During the Cost of Living Crisis

Russell Cain Updated: 19 June 2024
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With the burden of rising costs and expenses, it’s important to find ways to save money on your life insurance without reducing the coverage your loved ones need. We can help you keep your premiums affordable while providing the necessary protection for your loved ones. Here are five strategies to lower your life insurance premiums without sacrificing coverage.

Top Tips to Keep Your Life Insurance Affordable

  • Shop Around for Better Rates: By comparing offers from various insurers, you can potentially find considerable savings.
  • Reevaluate Your Coverage Needs: Take control of your life insurance costs by adjusting your coverage to reflect your current life stage and financial obligations.
  • Consider Funding Through Super: Use your superannuation to pay for life insurance and take advantage of tax benefits.
  • Adjust Income Protection Policies: Modify the benefit or waiting period to lower premiums while maintaining adequate protection.
  • Negotiate a Retention Discount: Ask your current insurer for a discount to keep your policy affordable.

How you may be able to reduce your life insurance premiums

1. Shop Around for Better Rates

Many insurers offer discounts on new policies or for new clients over existing ones. Instead of automatically renewing your policy, take the time to compare offers from various insurers. This proactive approach can uncover significant savings and ensure you get the best deal.

By shopping around, you can take advantage of competitive rates and special promotions that may not be available to existing policyholders. Reviewing multiple quotes and considering the benefits and coverage each insurer provides is essential. This way, you can find a policy that fits your budget and offers the protection your family need.

However important to remember when moving from one policy to another to answer the applications fully and accurately to comply with your duty of reasonable care, as failing to do so can leave you in a worse position if you don’t, compared to maintaining your cover with your existing provider. 

How to Compare Life Insurance Policies

Before choosing a life insurance policy, comparing different options is important to ensure you get the best coverage for your needs and budget. Here’s how:

  • Determine Your Coverage Needs: Assess how much coverage you need based on your life stage and financial responsibilities. Ensure the policy will adequately protect your family’s future expenses.
  • Understand the Types of Insurance: Learn about the different types of policies available, including life insurance, TPD insurance, trauma insurance, and income protection. Choose one that fits your age, health, and financial requirements.
  • Evaluate Costs: Look at the premium amounts and decide what you can afford. Compare stepped versus level premiums to see which better suits your budget.
  • Check Built-In Benefits and Optional Features: Review the benefits included in each policy and consider any optional features that may be worth paying extra for based on your specific requirements.
  • Consider Health Rewards: Some insurers offer incentives for maintaining a healthy lifestyle, such as premium discounts or other perks. Determine if these rewards are important to you.
  • Use Our Comparison Tool: Fill in the quote form above, and a specialist will contact you. This can help you get multiple quotes and assistance from our specialist life insurance brokers.

2. Reevaluate Your Coverage Needs

Life circumstances change over time, which can impact your insurance needs. It’s essential to evaluate if you need less coverage now than when you first took out the policy. Review your current financial obligations and any significant changes in your dependents or lifestyle. This might include paying off debts, changing income, or children becoming financially independent. Understanding your present situation allows you to adjust your coverage to suit your personal requirements.

Reducing your coverage can help you lower premiums and remove any over insured costs from your budget. This makes your policy more affordable and ensures it aligns with your current life stage. Regularly reassessing your coverage helps you stay protected while managing your budget effectively.

3. Consider Funding Through Super

Funding your life insurance through your superannuation can be a good way to manage your financial commitments. You pay premiums directly from your super account using your superannuation, potentially easing your regular budget constraints. 

Understanding the Pros and Cons

AdvantagesDisadvantages
No out-of-pocket costs since premiums are paid from your superannuation account.Premiums paid from your super balance reduce retirement savings.
Discounts available for annual payments.Pay-outs must meet both policy terms and SIS conditions of release.
Premiums are generally tax-deductible to your fund at 15%.Benefits may be taxed if paid to a non-financially dependent beneficiary.
XLess certainty and possible disputes with death nominations.
XLoss of built-in ancillary benefits like Funeral Advancement and Free Child Cover.
XOwn occupation definition not available for TPD insurance.
XLoss of built-in ancillary benefits like Partial TPD Benefit and Financial Planning Benefit for TPD insurance.
XTrauma insurance not available.
XIncome Protection Premiums are not tax-deductible up to your marginal tax rate for income protection insurance, which is usually higher than 15%.
XIncome Protection: Loss of built-in ancillary benefits like Accommodation, Rehabilitation, and Overseas Assistance Benefits for income protection insurance.

Making an Informed Decision

Understand the implications of using your superannuation for life insurance, as using super reduces your super balance and your retirement savings therefore consider strategies to mitigate this eg: be contributing more funds to your super, or talking to a financial adviser to understand other potential strategies to mitigate the impacts . They can help you evaluate your retirement goals and how funding your insurance this way might affect them. Balancing immediate financial relief with long-term security is crucial to ensuring your overall financial well-being.

4. Adjust Income Protection Policies

Reviewing and adjusting your income protection policy can be a smart way to manage costs while maintaining your coverage. By changing your benefit period or waiting period to suit your current financial situation better, you can significantly reduce your premiums without compromising on protection.

Consider extending the waiting period before benefits kick in can lower your premiums. This means you’ll have to wait longer before receiving payments, but this could be an option if you have enough emergency funds. Alternatively, consider shortening the benefit period if you have other savings or financial resources to fall back on. This means the policy will pay out for a shorter time, but it can reduce the overall cost. 

Ensuring Adequate Coverage

While adjusting your policy to save on premiums, balancing these savings with adequate protection is crucial. Regularly review your policy changes to ensure they still meet your needs and provide the necessary financial security. Keeping your policy aligned with your evolving financial situation will help you maintain comprehensive coverage at a manageable cost.

5. Negotiate a Retention Discount

Retention discounts are incentives offered by insurers to keep existing customers. If you’re finding it difficult to afford your current premiums and can’t switch to a new insurer, negotiating with your current provider can effectively lower your costs. Many insurers are willing to offer discounts to retain loyal customers, so it’s worth asking.

Steps to Negotiate with Your Insurer

  1. Contact Your Insurer: First, contact your insurer and express your concerns about the affordability of your current premiums.
  2. Explain Your Situation: Be clear about your financial situation and why you need a reduction.
  3. Request Discounts: Politely ask if any discounts or retention offers are available that could help lower your premium.
  4. Keep Track: Make a note of the conversation and any potential offers for future reference.

What to Do If Negotiation Fails

If you are unable to switch to a new insurance provider, you should contact your current insurer. They might be able to provide you with a different discount or if your policy provides it, offer a “premium holiday” that stops the premium and cover however allows you to reinstate the cover after 12 months without any medicals / underwriting at the time of reinstatement.  You could also consider adjusting your coverage in ways that won’t affect essential benefits, such as changing your policy’s sum insured, waiting or benefit period. These adjustments can lower your insurance costs without compromising the necessary protection.

Frequently Asked Questions and Answers

  • How can I find the best life insurance deals?

    To find the best life insurance deals, compare quotes from multiple insurers and look for discounts on new policies. Use online comparison tools and consult with insurance brokers who can provide expert assistance.
  • Is it worth reducing my coverage?

    Reducing your coverage might be beneficial if your financial situation or dependents have changed. Reevaluate your current needs and ensure that your coverage amount meets your family’s future expenses while fitting within your budget.
  • What are the pros and cons of funding through super?

    The pros include general tax advantages, and not using your personal cash flow however on the other hand, the cons involve reducing your retirement savings and potential restrictions on coverage. Consulting a life insurance broker to help you understand the implications and make an informed decision.
  • How can adjusting my income protection policy help?

    Adjusting your income protection policy’s monthly benefit, benefit period or waiting period can lower your premiums. Shortening the benefit period, reducing the monthly sum insured or extending the waiting period can make your policy more affordable while still providing essential protection.
  • Can I ask my current insurer for a discount?

    Yes, select insurers offer retention discounts to keep customers. If you find it difficult to move to a new provider, contact your broker, express your concerns about affordability, and ask for available discounts or retention offers.

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