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Cheap Life Insurance

Mitch Ramsbotham

Financial Expert Updated on June 20, 2023

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Understandably, cost is a major factor when deciding what life insurance policy is right for you. So how can you find the cheapest policy that still meets yours and your family’s needs?

Life insurance is something that gives most of us peace of mind and the feeling of financial security. We never truly know when it’s our time to go and when our family or significant others will need financial support.

However, the life insurance world can be very complicated, overwhelming, and difficult to navigate. How do you know how to decide when they’re spending too much, or too little, on a policy? What lifestyle factors go into our ability to get affordable life insurance?

Why are some policies seemingly much less expensive than others, while seeming to offer the same benefits?

Are there issues in the fine print of very cheap life insurance policies that take away the apparent benefits of their low prices?

How should one navigate the world of life insurance prices?

My Money Sorted provides you with a guide to give you peace of mind in this regard, to help you take advantage of the best cheap life insurance Australia has to offer.

Is There a Cheapest Life Insurance Policy? 

The short answer here is, “Yes.” There are very inexpensive life insurance products in Australia that might cost you less per month than a single low-priced dinner in Sydney. If you want cheap life insurance, Australia has it.

There are Australian life insurance options available with a $500,000 amount of cover that might cost $20, $30, $40, or more per month for both men and women. However, while the cheapest policy may be appealing, it’s important to identify how much life insurance you need to best provide for your family when you’re gone.

Cheapest vs. Most Expensive Life Insurance

What should you choose – the cheapest or the most expensive term life insurance policy?

The cost vs. value argument comes into play here but depending on your personal circumstances, the best policy for you will likely lie somewhere in the middle.

There are several factors involved in establishing an exact policy amount that varies from individual. Life insurance costs vary based on:

  • age
  • health
  • medical conditions
  • occupation
  • hobbies and lifestyle
  • family history

Additionally, the nature and amount of the death benefit selected, in the context of age, health, and so on, will have an effect on the monthly premium price. 

If someone aged 74, with multiple health conditions and who smokes, wants a term life insurance policy with a $1.5 or $2 million death benefit, their policy premium is going to be exorbitantly large each month, almost regardless of who their provider is. This type tends to be classed by life insurers as a high risk insured individual.

Are You Eligible For Cheap Life Insurance? 

Your eligibility for cheap life insurance – or life insurance at all – will be based on a range of factors and depend on the provider you choose.

For some, there are factors outside of their control that influence whether they’ll be able to purchase life insurance at an affordable rate. If you’re 77 years old, there is virtually zero possibility that you will be able to find life insurance as cheap as someone aged 26 would be able to find it.

This has nothing to do with any unfairness or bad choices you’ve made in your life; it’s simply a fact that if you are 51 years older than someone else, you are much closer to the end of your life! So, it is not unreasonable that a life insurance company will need to charge you more for your life insurance premiums.

Nonetheless, there are many ways you can be eligible for cheap life insurance premiums, and they are all factors within your control to change!

To increase your chances of being eligible for your life insurance cover, it’s important that you:

  • keep as fit and healthy as possible
  • compare life insurance quotes to ensure you find the right policy for you
  • consider purchasing life cover when you are young as your premiums are likely to be far lower

Factors That Affect Your Life Insurance Premiums

There are several items that have a small, and sometimes significant, impact on how much you’ll pay each month for your insurance premiums. The good thing is, you are in control of many of them!

Age

This is, of course, one item you can’t control. As mentioned above, your age is a significant factor in determining how much you’ll pay for your monthly premiums. If you’re 24, you’ll probably not pay much more than someone who’s 18, assuming you’re both in good health.

But if you’re 64, you’ll almost certainly be paying more than someone who’s 24, even if you’re in excellent health. The simple fact is, the closer you are to the event of your death, the more you’ll pay for your life insurance premiums. 

Health and Lifestyle

This is a big factor in determining your monthly life insurance costs and with good reason. If your lifestyle and health profile indicate someone who’s at serious risk of premature death, you’ll be a bigger liability to an insurance company and will need to pay more. 

If you’re 30 years old but severely overweight with a high body-mass index (BMI), are diabetic, have high blood pressure and high cholesterol, and are a smoker, you’ll likely pay more per month in premiums than someone who’s twice your age but in pristine health. Age is not always the biggest factor for premium costs, especially in situations in which someone is living a high-risk lifestyle.

Past lifestyle behaviours, such as criminal history, driving history, extensive foreign travel, and things like these also may play a role in determining your premium payments. The best predictor of future behaviour tends to be past behaviour, and life insurers keep these things in mind in their evaluation process.

However, there are also situations in which someone might be physically healthy but live or work in high-risk situations, like people who do extreme sports like cliff diving or people who work in coal mines. Occupations like active-duty military, construction, aviation, and first responders also live a higher-risk lifestyle, even if they’re physically in great shape. 

Compared to a healthy, sedentary man who spends his life at a corporate office desk, these potential clients are going to present a bigger liability to an insurance company as people who are statistically more likely to get into fatal situations or accidents. Occupation and lifestyle in terms of recreation can also have some bearing on your monthly premium. 

Gender

This one is relatively straightforward. Statistically, women tend to live longer than men across the board. So, it follows that premiums will tend to be lower for women than for men, as they’re less likely to pass away as early.

Medical and Family History

Many insurance companies will want to know about any pre-existing medical conditions you have, past illnesses, usage of drugs or nicotine, and so on. These factors are important because they can help, even imperfectly, predict a person’s future health risk factors and possibility of premature death.

Even if you’re perfectly healthy now and have no tarnished medical history yourself, your family’s medical history also plays a role in your evaluation process. Insurance providers might ask about your family’s history regarding things like cancer, kidney/liver/heart disease, diabetes, Alzheimer’s, drug/alcohol use, terminal illness, or early death. 

These also, imperfectly, can help predict your own health risk factors into the future.

Smoking and Tobacco Use

This item also plays a significant role in evaluating your premium amount. If you’re a heavy smoker and tobacco user, you are unquestionably a much higher risk as a customer, and will pay more, and sometimes significantly more, on your monthly premiums.

The reason for this is that smoking and tobacco use are so sharply and indubitably correlated with adverse health conditions and early death that you will likely need life insurance death benefits sooner rather than later. 

The upside of this is that smoking and tobacco use are habits that can successfully be overcome, and the health benefits of quitting these habits can begin in as little as a few days.

Things To Consider Before Choosing The Best Cheap Life Insurance Company 

When evaluating a cheap life insurance policy, it’s important to consider a few things. First, how old are you? Even if a policy is cheaper than other policies, is it worth the investment right now? If you’re older and in poor health, your premiums may still be very high. 

How is your financial security? Do you have the monthly budget to support a high life insurance cost, and would the death benefit be worth what you would be paying into the policy? Some people choose the cheapest policy only to find out that they are underinsured later on when they need o make a life insurance claim.

Second, if you’re buying cheap life cover, you may be buying term life insurance.

However, it’s also wise to consider the other 3 types of life insurance which can protect you and your family in other scenarios other than death/terminal illness:

  1. Total and Permanent Disability (TPD) Insurance
  2. Income Protection Insurance
  3. Trauma Insurance

If you believe life cover is for your needs, consider a total and permanent disability (TPD) insurance, trauma insurance or income protection insurance.

Also consider how much life insurance level of cover and the type of insurance you really need. If your beneficiaries only need a lump sum payment of $250,000, do not get a policy with higher premiums and a death benefit of $1 million as you will be paying higher premiums than you need to.

It is important to assess your individual circumstances and family’s overall financial needs, such as living expenses, credit card bills, and school fees, and not pay for something that would not be absolutely necessary.

One good rule to remember is that your death/life cover should be approximately 10 times your annual tax-deductible income, pre-tax. However, this is only a guide.

Fourth, take time to consider multiple companies before securing a policy. It’s good practice to look at what several different companies have to offer, such as short waiting periods, relevant product disclosure statements (PDS), exclusions, financial services guide, or target market determinations (TMD), as you might realise one company has a better overall discount for you.

Fifth, be mentally prepared to answer plenty of questions in your application, and be truthful. Applying for a life insurance policy means being detailed and thorough, and you’ll want to have plenty of information ready about your financial situation, your work, your family health history, and so on. Be prepared.

Additionally, look for legitimate life insurance companies by checking their Australian business number (ABN) and Australian financial services licence (AFSL).

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Ways You Can Keep Your Premiums Affordable 

There are a few ways to make sure your premiums stay affordable, especially if you’re enrolled in a term life insurance policy that expires after 10 or 15 years, and you want the renewal rate to stay reasonable.

  1. Stay healthy. Your best chance at getting a great renewal rate on a term life insurance policy is to stay as healthy as you can. Exercise regularly. Be a non-smoker. Avoid excessive alcohol intake. Get enough sleep and eat nutritious food. Drink plenty of water. Avoid a sedentary lifestyle.
  2. If you’re approaching a renewal of your term life insurance policy, help keep it affordable by only re-enrolling according to what you need and what your family needs, and nothing more. When you pay for things you don’t truly need, like very high death benefits or extra add-ons that don’t necessarily apply to your life, it’s a waste of money.
  3. Look for a guaranteed term level premium, meaning, a term insurance policy that has fixed premium rates for the duration of the term.
  4. Another way to keep insurance premiums affordable, if you can do this, is to pay an annual sum. For some carriers, this can create up to a ten percent discount, which can really add up.
  5. Seek professional advice. A financial adviser or life insurance specialist can help you compare life insurance quotes and find cheap life insurance that fits your needs.
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What If The Premiums Become Too Expensive?

If you find that your premiums are becoming too expensive, it might be wise to consider seeking advice from an Insurance Broker, an Insurance Specialist or a Financial Adviser.

You have plenty of options but it’s important that you have the right cover in place to provide financial security if you need to make a claim.

  • One option for a term life insurance policy that’s becoming too expensive is to lower the overall death benefit. By lowering the death benefit from $400,000 to $250,000, for example, this will yield a decrease in your monthly premium in most cases.
  • You may like to explore insurance options in your superannuation fund. These are considered group life policies and can be cheaper but along with cheaper premiums, your benefits are likely to be decreased also.
  • Work with an Insurance Specialist to help you find a cheaper policy or a life insurance policy more relevant to your needs.
  • Consider if you can afford to cancel your policy. This may not be an option for some. But, if you are a retiree and you have enough in savings, combined with a frugal lifestyle, this may be a good option in order to save some money each month, especially if a death benefit is not something that is a crucial need for your loved ones. If you have no children in the house, no mortgage to pay off, and are able to live comfortably off of your retirement, an expensive life insurance policy simply may not be worth it.

Are There Any Downsides To Cheap Life Insurance?

While there are obvious financial benefits to scoring a cheap life insurance policy, there are some potential disadvantages you should be aware of when making your decision.

Cheap life insurance policies are normally quite basic meaning it may exclude some important features such as:

  • Extra insurance policy types (like trauma, TPD or income protection)
  • Inflexibility to change, adjust or increase your cover
  • Some cheap policies may not cover pre-existing conditions

It may be more important to consider the best process to get the right life insurance policy.

You may be able to get a cheap policy direct online but it may not cover you for the right things, you may actually be exempt from making a claim without realising it, or you may be underinsured putting your family and loved ones at risk.

While it’s important to get the best deal, life insurance isn’t something that should be frugal on.

Tips For Saving On Your Life Insurance 

Here are a few things you can do to make sure you don’t pay more than necessary and save money on your insurance premiums.

  • Adopt Healthy Habits
  • As mentioned earlier, the healthier you are, the lower your premiums will generally be. Small healthy habits form big changes over time. 
  • Compare Policies
  • One policy may not be best for you, or it may be structured in a way that doesn’t work with your budget. Compare life insurance policies to determine what’s right for you.
  • Bundle Policies

If you’re in a situation where you need multiple types of insurance or “rider” packages that blend supplemental insurance products to meet your needs, this can often be to your advantage.

Most carriers offer discounts when bundling insurance products together. 

  • Look For Frequent Flyer Programs
  • Some life insurance carriers have partnerships with certain airlines, meaning that as you pay your insurance premiums or sign up for new policies, this can translate to savings on travel or other benefits, which can definitely add up over time.
  • Apply Coupon Codes
  • Some life insurance carriers offer coupon codes online for new clients, which can be valuable. Sign up for email updates from carriers you might be interested in, and you might receive offers with coupon codes in your inbox.

Can You Get Cheap Life Insurance Without A Medical Exam? 

The answer to this question is somewhat complicated. If you’re in great health, a medical exam is definitely to your advantage, because you will have a doctor’s proof that you are a great candidate for a low monthly premium. 

However, if you take a medical exam and have poor results, this may lead to a higher premium than if you had not taken a medical exam.

However, as a general rule, it is very uncommon to get access to the cheapest life insurance policies without a medical exam. just be careful that the lack of a medical exam doesn’t mean you won’t be eligible to make a claim later in life.

Are Premiums Guaranteed To Stay The Same?

It depends.

Unless you specifically have a guaranteed term level plan as mentioned above, as your age, health, and life situation changes, your premium rates will likely fluctuate as well.

This will also depend on whether you picked level or stepped premiums.

How To Get Cheap Life Insurance Quotes Online

There are several online insurance aggregators and review sites that offer links to get initial insurance quotes quickly with a minimal amount of information provided.

Most insurance carriers have options directly on their website for determining a cheap life insurance quote as well.

Should You Cancel Your Life Insurance If You Can No Longer Afford It?

As mentioned earlier, the answer to this question depends on your personal circumstances. If your premiums are becoming too high to afford, and if your loved ones are not in desperate need of any funds that would come from a death benefit payout, and if you have no significant financial obligations like children in the home or a mortgage, it may be okay to let your policy cancel. However, seek professional advice before doing so

This should also be judged on a case-by-case basis, and you need to have an intimate understanding of your financial situation before making a move like this.

However, if you and your loved ones conclude that any funds from a death benefit are too important to lose access to in case of your death, it is probably best not to cancel.

Still not sure where to start, or want help securing the right insurance faster? 

That’s okay!

Many people may be unaware of this…but just like you, 41% of Aussies intend to get financial advice rather than going it alone, according to an Australian Securities and Investments Commission (ASIC) report.

You can reach out to an My Money Sorted to guide you for free before you seek professional advice from an insurance expert!

When you book a call with an My Money Sorted, you’ll:

✓ get a better understanding of your money matters

✓ have an idea of your money goals

✓ be matched with the right insurance expert who can help simplify your search for an insurance policy that fits your needs

My Money Sorted is your stress-free pathway to getting ahead with your money. Here’s what your journey will look like:

Step 1: Start off with a quick money matters session with My Money Sorted

Step 2: Get matched with a Insurance Expert that’s right for your money situation

Step 3: Take the first step towards getting the protection you need with a clear and sound roadmap prepared by an Insurance Expert

It’s that easy!

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