Premium Freeze Option

One of the ways to keep your life insurance premiums affordable, if available by your insurer, is the premium freeze option. It allows you to freeze your premiums which you may consider if they are becoming too expensive or unaffordable.

The Premium Freeze option is generally a built-in benefit that comes as standard with your life, trauma or TPD insurance policy. However, this option is only available with stepped premiums and does not include a freeze on the policy fee or stamp duty portion of the premium.

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Can you reduce your life insurance premiums?

Yes, reducing life insurance premiums is possible, by 1. Electing the premium freeze feature, 2. Removing CPI increases from your policy on renewal or 3. Contacting your insurer to reduce the sum insured.

The Premium Freeze Option

If your premiums are becoming unaffordable, the premium freeze option can be used to freeze your premiums. Essentially, your insured amount reduces each year, so your premiums do not increase.

Removal of CPI Increases

Each year, your cover will automatically increase, so it keeps up with inflation. If you want to reduce the cost of your premiums, simply write to your insurer requesting the increase not be applied. Most insurers will allow you to do this over the phone for a one-off removal of the CPI increase; then you will need to request this in writing.

Reduce the sum insured

If after using the premium freeze option, and removing CPI increases you still struggle with affordability, you may want to consider reducing your level of cover before cancelling your policy altogether.

It may also benefit you to shop around, thus ensuring your existing insurer is providing value. Alternatively, select a provider who offers the premium freeze option.

How does the Premium Freeze option work?

The premium freeze option keeps your premiums fixed at the same price year on year while the level of cover reduces each year to compensate for the increase in risk you present as you get older.

The price your premiums will be frozen at is generally the price they are on when your life insurance company receives your written request to freeze your premiums or the premium at the onset of the policy.

For example, let’s imagine you are currently 30 years old and you have $500,000 worth of cover, and you’re paying $50 a month. With the premium freeze, your premium stays at $50, but on your renewal, your level of cover drops. So, your monthly premium amount stays consistent, while your level of cover decreases.

What is the effect on my policy?

Generally, by freezing your premiums your sum insured will decrease each year to reflect the higher risk you present as you get older while your premium remains the same. If you choose to freeze your premiums, some options may no longer be available to you, including:

Inflation protection

Inflation protection increases your insured amount each year by the increase in the consumer price index. If you choose to use the Premium Freeze option, your level of cover won’t increase.

Guaranteed Future Insurability

Guaranteed Future Insurability allows you to increase your insured amount without submitting your medical details again when a significant life event occurs.

Who does the premium freeze option suit?

The Premium freezing option is generally for people sticking to a strict budget (and don’t want level premiums) or is rapidly paying off their debts and want to mirror their home loan reducing or for people experiencing difficulty affording their premiums. Premium freeze provides an alternative to cancelling their cover, by maintaining the current premium price.

Premium Freeze Illustration

Age Premium Sum of Life Insurance
35 $50.00 $1,000,000
36 $50.00 $975,000
37 $50.00 $950,000
38 $50.00 $925,000
39 $50.00 $900,000
40 $50.00 $875,000
41 $50.00 $850,000
42 $50.00 $825,000
43 $50.00 $800,000
44 $50.00 $775,000
45 $50.00 $750,000

Can I unfreeze my premiums at a later stage?

Yes, generally you will be able to unfreeze your premiums at a later stage if you choose to do so, this will generally be available on a policy anniversary, and you may be required to notify your insurer in writing that you would like to unfreeze your premiums.

What types of cover is it available on?

Generally, it is available with:

Life Insurance

Trauma Insurance

TPD Insurance

Insurers that offer the Premium Freeze Option

Insurer Age offered
AIA 35
AMP No age specified
MLC (called Economizer) 30
OnePath No minimum and maximum entry ages
TAL 30

Should you want to consider the option of decreasing life insurance on your quotes, please inform us as we will ensure this is included in your comparison reports we send you. If you have any further questions, please ask us below.

Published: January 13, 2017

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2 Comments

  • Anne Lambert |

    I have had a MLC life and TPD Super policy for the past 24 years. They extended earlier policies when we needed an increase in cover then cancelled them in favour of the latter polices when we didn’t need so much cover. At present I pay $620 p/m and find it unaffordable. I am 64 this birthday. The payout figure is $350,000. The policy is increasing at 20% p.a while the value only increases by CPI. What do you recommend?

    • Brett Lenertz SPECIALIST
      Brett Lenertz |

      Hi Anne and thanks for making contact with us. You do have some options that you could consider in your situation. Firstly, it is important to consider that the TPD Policy could change in relation to its definition or qualifying reasons from the age of 65 to a ‘Loss of Independence’ definition which then means, the inability to perform usually two (2) or more Activities of Daily Living is the criteria to make a claim. You will have to check if this applies to your policy and the resulted impact to your insurance needs if this was the case. Secondly, ask yourself does this level of cover suit your current needs or could you reduce your level of cover to still protect yourself adequately and therefore your premiums would reduce? Lastly and of course you are welcome to contact us on 1300 135 205 and speak to one of our Life Insurance Specialists who can look at providing quotes for you as we can compare up to 11 x Life Insurance Providers in the Market. Thank You

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