How Much Does Life Insurance Cost in Australia?

Understanding what life insurance costs

Life insurance is designed to offer financial peace of mind. In Australia, the main cost of taking out life insurance is the premium—an amount you pay either monthly or annually. Premiums can differ widely from one person to another because they are influenced by a number of factors, including the kind of policy you choose and details about your health and lifestyle.

When you select a life insurance policy that suits you and your family’s needs, you will be asked to make premium payments. While there may be different features and options available within policies, the premium is typically the key ongoing cost to plan for.

Why premiums vary from person to person

Premiums are not one-size-fits-all. Different levels and lengths of cover come with different premiums, so the price you pay will depend on the type and level of life insurance you select. Beyond the structure of the policy itself, insurers also consider personal information that helps them assess risk.

When you apply for life insurance, you are usually asked questions about yourself and the way you live your life. These questions commonly fall into several categories:

• Personal or lifestyle questions: your date of birth, gender and whether you smoke.
• Medical questions: questions about pre-existing conditions.
• Employment questions: what your occupation is, what your income is and what you enjoy doing in your spare time.

Together, these factors can influence the premium you are offered. This means that two people choosing similar cover could still pay different amounts, depending on their circumstances and the information provided during the application.

Estimating how much cover you may need

Because the cost of life insurance is closely tied to how much cover you take out, a practical starting point is to estimate the level of cover that could help your loved ones keep life on track if you were to pass away. This can be a challenging question, but working through it step by step can make it more manageable.

One approach is to consider the financial obligations your family might still need to meet. For example, you might think about debts such as a mortgage, as well as ongoing costs like utility bills, groceries and school bills. These are the kinds of expenses that may continue even if a household income changes suddenly.

Next, consider what other funds your family might receive in these circumstances. This could include money from the sale of investments, your super and your personal savings. By comparing what may be needed with what may already be available, you can identify whether there is a gap.

If there is a discrepancy between what your loved ones will need and what they are likely to get, that difference can be used as a guide for how much life insurance coverage to opt for. While this method is not the only way to think about cover, it provides a structured way to connect the amount insured with your household’s real-world financial needs.

Ways to reduce life insurance premiums

There are a number of ways to reduce your life insurance premiums. Some relate to how and when you choose your policy in the first place, while others are linked to your lifestyle. The right approach will depend on your circumstances, the cover you want, and what changes are realistic for you.

Comparing policies can help you check whether you are getting a policy that best suits your needs. It can also help you think carefully about add-ons and extras—both those you want and those that may not apply to you. Since additional features can affect the premium, being selective about what you include may help manage costs.

It is also important to check the terms and conditions of your policy so you are clear on how much you will need to pay in premiums and when payments are due. Understanding these details upfront can help avoid surprises and make budgeting easier.

For people looking to reduce premiums on an existing policy, lifestyle factors may be relevant. Cutting down on lifestyle risks like smoking or drinking, and generally following a healthy way of life, may help. Examples mentioned include adopting a healthy diet and exercise regime to keep your blood pressure low.

Another consideration is the term of your policy. Generally, the longer the term, the lower the premium. This means it may be worth looking for cover that suits you for the long haul, or cover that can be tweaked and adapted easily as your circumstances change.

Premium reviews and changes over time

It is also useful to know that premiums are subject to review and can change depending on a number of factors. You will be sent information about your premiums before each policy anniversary. This provides an opportunity to review what you are paying, confirm the cover still matches your needs, and consider whether any adjustments are appropriate.

When it may be time to review your cover

Life insurance is often chosen to reflect your current situation, but circumstances can change. As you blend households, plan your lives and potentially re-evaluate your finances, it can be sensible to review your insurances to reflect your new situation.

Having the right life insurance in place can support financial peace of mind. Understanding what is on offer through your super can also help you find cover that works for you, particularly when you are comparing options and thinking about what best fits your needs.