How much does Life Insurance cost?

Life insurance can cover some of the biggest financial commitments in your family’s life, such as a mortgage and school fees, if you’re no longer around to provide for them. So you’d naturally think that valuable protection like that comes at a high price. Actually, life insurance can be surprisingly affordable for many Australian families – often starting at just a few dollars a week. To understand how affordable life insurance would be for your situation, it’s important to understand how life insurance premiums are calculated.

In short, the life insurance premium you pay at a certain point in time reflects the risk of you passing away at that point in time. When working out this risk, most life insurance companies will look at the following factors:

1. Your age

This is one of the biggest risk factors in determining your premium. After all, the older we get, the higher the likelihood of us passing away. 

This will also determine any premium increases each policy anniversary depending on whether you have selected a level premium policy or a stepped premium policy. For stepped policies, there are two main methods of pricing life insurance by age. Some policies have escalating premiums on a yearly basis, with incremental increases applied to your policy each year at the time of your policy anniversary and with each increase in age.

Alternatively some insurance companies price life insurance in age bands – for example 25–34 and 35–44. Age bands reflect the fact that the risk of passing away doesn’t necessarily increase every year, but rather increases when you reach certain stages in life. Age-band increases are less frequent but are generally greater in magnitude.

2. Your gender

Life insurance premiums are usually different for males and females. Rates for males are normally slightly higher than those for females. This is largely because life expectancy for females is higher than that for males – currently female life expectancy in Australia is 84.3 years for a baby born today, compared to 79.9 for a male. In addition the mortality rate for each age (that is the likelihood of dying in any specific 12 month period) is higher for males than for females of equivalent age. Insurers take account of this by charging higher premiums for males.

3. Your health

Your health history at the time you apply is another big factor in determining the premium you pay, and whether the insurer will cover you at all. If you’ve had major health events such as heart problems, cancers or strokes, or potential high risk factors such as high blood pressure and high cholesterol, an insurer may potentially decline your application for life insurance, or impose exclusion or something called a “loading” on your premium.

A loading is an additional premium amount that you’d need to pay on top of the standard premium for someone of your age and gender who does not have any health risk factors.

You should note that only your health history at the time of applying is relevant in setting your life insurance premium. You don’t have to notify the insurer of health events that occur after your policy starts, unless you make a change to your cover. Taking out life insurance when you’re young and fit can help you avoid loadings that may be imposed if you apply later in life when your health may not be as good.

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4. Your lifestyle

Life insurers can also decline your application or impose a loading if aspects of your lifestyle increase the risk of death. The most common lifestyle factor is smoking. Life insurance policies usually have one set of rates for non-smokers, and a higher set of rates for smokers.

Hazardous activities are the other main category of lifestyle factors that insurers consider. Dangerous occupations in industries such as mining, construction and security, and dangerous pastimes such as skydiving, mountain climbing and diving can often result in loadings being applied, or cover being declined.

5. Your cover amount and policy options

The amount you want to cover is also a main factor that goes into determining your premium. The higher the amount you wish to cover, the higher the premium.

Some policies also offer optional covers like serious illness cover, which you’ll normally pay a little extra for.

Some policies will include an automatic indexation feature which has the effect of increasing your benefit amount by some pre-determined percentage each year. This will also result in a proportionate increase in the premium you pay. This feature can generally be opted out on an annual basis.

How much would it cost me?

If you are not sure about how much cover you’re after, you can use a Life insurance calculator to assist you to estimate your cover needs. Once you’ve estimated the maximum life insurance benefit amount that you need, you can get an accurate quote based on your particular needs and circumstances over the phone in minutes with Real Life Insurance. Simply call 1300 377 325 or visit

*Premium based on $100,000 benefit for a female, non-smoker aged between 18 and 34.