Value of Finding the Right Life Insurance Premiums

To determine your life insurance premiums the insurer has to take various factors into consideration; such as the amount of cover you require, your age, gender, smoking status, your medical history and the type of premium structure you choose. Lesser known influences include stamp duty, frequency loading and how compressive your policy is.

Published March 7, 2018

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7 Factors Influencing Your Premium

Gender: is used as a risk rating factor, one reason being the gender differences between life expectancy.

Age: Generally, the younger you are, the less expensive your cover, due to age being a significant factor in developing certain

Your health: Specifically pre-existing medical conditions and your BMI, which is calculated using your height and weight. If your BMI is above 35 your premiums might become more expensive.

Smoking status: If you are a smoker, you’ll pay a higher premium rate because of the increased risk of heart disease, cancer, and lung disease.

Pastimes: Some past times pose a higher risk than others and usually requires extra premiums, for example, Motor racing and skydiving.

Premium Type: You usally have a choice between either stepped or level premiums, while select insurers’ will also offer hybrid premiums. Depending on your choice your premium structure will profide certain advantages and disadvanatges.

The Amount Insured: This refers to the level of cover you’ve applied for.

Before you apply for insurance, make sure you fully understand your premium options. We have meticulously gone through your most prevalent questions and answered them below.

What affects life insurance premiums?

1. Brand

Every insurer offers a different base rate premium. We have done extensive research on more than 3,000 quotes from 32 brands and found that certain big brand insurers are charging higher life insurance premiums.

2. Trauma standard vs. Trauma plus

These are generally the two types of Trauma Insurance policies to choose from. The plus option covers an additional 10 to 15 critical illnesses, making the policy generally more comprehensive and thus the higher premium.

3. Income protection plus vs. standard

Standard income protection is generally the cheaper of the two options because the Plus option adds additional benefits, such as a lump sum payments for select traumatic events built in.

We make it easy for you to compare policies online with our powerful comparison engine.

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4. Frequency loading

When you pay your premiums more frequently, i.e. monthly instead of annually, you may incur an additional loading.

5. How comprehensive the policy is

This refers to the insurer’s definitions of key terms, for example, Own Occupation vs. Any Occupation Home Duties for TPD.

6. Stamp duty

This is state based tax and will differ between states. Insurers will generally include the charge of stamp duty in your base premium for certain cover types.

7. CPI increases

Many insurers rightly or wrongly include built-in Consumer Price Index (CPI) increases into the sum insured, meaning you have to “Opt Out” of these if you don’t want your cover to increase by CPI – 5% which will result in an increase in your premium.

8. Premium options

Generally, you’ll be able to choose between a Level or Stepped premium structure and Hybrid premium option.

What are the different types of life insurance premiums available to me?

Frequently asked questions and answers

  • Can you reduce your life insurance premiums?

    There are a variety of ways you can save money on your premiums. For example, take out a policy when you’re young, the older your get, the more expensive it becomes.

    Shop around and compare quotes, making sure your cover amount suit your current needs. Seek out insurers offering healthy life discounts on premiums or removing policy fees from premiums removing policy fees from premiums. Another option might be to have the CPI from your policy removed, meaning your policy will no longer keep up with inflation.
  • Is there GST on life insurance premiums?

    No, there is no GST on life insurance premiums. If you own your life, TPD or Trauma insurance policy and it’s under your name, you can’t claim a tax deduction on your premiums, but your claim payout will be tax-free.

    However, if you have a policy funded through superannuation, there can be tax consequences. In general life insurance benefits are not taxed if they are paid out to a financial dependant, however, if not they could be.
    Income Protection premiums are tax deductible, because you are protecting your income, but be aware, when you claim on your monthly benefit then you have to pay tax on that benefit.
  • How does payment of life insurance premiums work?

    You can pay by cheque, direct debit or credit card for yearly payments, which is generally 5-8% cheaper than monthly payments, depending on the insurer. If you prefer paying monthly premiums the insurance company will only allow payments via direct debit or credit card.

    For a more in-depth comparison and accurate assessment, please complete the request above, and we’ll provide you with a detailed comparison to help you decide which premium style will suit you best.

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