With so many providers, products, features and pricings on the market, it’s no wonder that many Australians question whether they can get a better deal on life insurance.
Chances are, you can get the life insurance products you want for less than you’re currently paying.
If you’ve repaid your mortgage, the kids have left home, you’ve got a healthy amount of savings tucked away or the dangerous past times you used to engage in have stopped, you may not need the same level of cover you once required.
Or, if reducing day-to-day expenses is your goal, there are ways to save money without having to abandon your policy or settle for less cover than you need (after all, if you’re struggling now just imagine what it will be like for your family if you pass away and you’re underinsured!).
Whatever your reasons for wanting to reduce your life insurance premiums are, saving money without having to compromise on the quality of your life insurance products is entirely achievable.
Here’s how:
Consolidate Your Super Insurance
If you have life insurance already included in your superannuation, consider consolidating this cover with your current life insurance fund. Combining covers will save money that you would otherwise be spending on unnecessary fees and premiums.
Compare Your Current Policy
Talk to an insurance adviser to see if you are getting the best value for money with the life insurance you already have. Chances are, you may be holding on to a policy that is:
- Outdated and no longer reflects the level of cover you require
- Charging uncompetitive rates/li>
If you’re healthy, there’s no reason not to make the switch to a provider offering better value – even if it means taking another medical examination.
Opt for a Longer Waiting Period
If you have income protection insurance, the amount of time you must wait before being eligible to claim on your policy is known as the waiting period. If you are in a position to financially support yourself for a period time in the event of you losing your income through illness or accident, it is cost effective to extend the waiting period on your policy, as this will reduce your premiums.
The reason for this is that a longer waiting period gives the insurer less chance of having to make minor payouts over the life of your policy. Consider: with a 14-day waiting period, you must be completely off work for 14 days before you are eligible to make a claim. Once this 14 day period has expired, if you meet the remaining conditions of your policy you will be eligible to receive a benefit payout for as long as you continue to meet these conditions; effectively, as long as your are still prevented from working by your disability. The same applies with a 90-day waiting period.
However, it is much more likely that you will become disabled and off work for a period of, say, 30 days whilst you recover from some injury (and thus be eligible to claim for two weeks’ income replacement) than it is that you will be off for three whole months and be eligible to claim before going back to work. In this sense, whilst the insurer will still pay your benefit in both cases if you are permanently disabled, this risk to the insurer of having to pay temporary benefits is greater the shorter your waiting period. Accordingly, premiums cost less.
Income Protection insurance is designed to provide you with an ongoing benefit if you lose your income due to illness or accident. If you are in a financial position to provide for yourself for three months should you be unable to work due to disability, a 90-day waiting period will be an effective way of reducing your premiums and therefore the total cost of your insurance.
Work on Your Health
Along with your age, your physical health is one of the biggest factors determining how much your life insurance policy is going to cost.
If you can demonstrate that your health has radically improved since your initial medical assessment, you may find yourself with a more appealing risk profile that warrants a decreased premium.
Ways that you can adjust your lifestyle and save money on life insurance include:
- Quitting smoking: You can apply for life insurance that’s charged at the standard rate at least 12 months after your quit date.
- Reducing or eliminating alcohol consumption: If you can show that your drinking habits have permanently changed for the better, you may be bumped down a risk category.
Losing or gaining weight: Working on your fitness so that you fall within a healthy BMI category and then maintaining that healthy weight is one of the best ways to secure lower premiums.
Get Covered While You’re Young & Lively
When it comes to buying life insurance products, the biggest mistake you can make is waiting until you’re older to get covered. Applying while you’re young and healthy will give you the best chance of securing a lifelong policy that costs the “standard” premium rates.
Enquire About Pausing Premiums
If for any reason, you are experiencing severe financial hardship and cannot afford to pay your life insurance premiums, the first thing you should do is talk to your insurer about temporarily pausing your payments.
Most insurers allow their clients a few months over the life of their policy wherein they can “pause” their premiums. Or, sometimes insurers give their customers the option of “freezing” the cost of their premiums in return for a reduced amount of coverage.
Enquiring about these grace options could mean the difference between getting enough monetary breathing room to keep your policy and letting your policy lapse and losing the lower premium rates you were able to attain by obtaining coverage at a young age.
Swap Your “No Medical” Coverage
Chances are, if you opted to get “no medical” coverage when you first bought your life insurance, you are paying an exorbitant premium for the pleasure. You’re better off just biting the bullet, getting the medical examinations required by a competitive policy out of the way, and enjoying the thousands of dollars you’ll be saving later down the track.
Ask for Advice
Most people are not experts when it comes to navigating the complex world of life insurance. If you need help understanding which options will work best for you, then you’ve got nothing to lose by picking up the phone and calling an adviser.
Our team of life insurance advisers understand the different underwriting guidelines each of our premium partners uses, and can help you compare life insurance policies to find one best suited to your needs. These underwriting guidelines are how insurers determine how important various risk factors are. For instance, some insurers will place sufferers of all types of heart problems in the “high risk” category whereas others will look at heart issues on a case-by-case basis and determine the risk category according to an individual’s particular prognosis.
Because each insurer will assess a person differently, getting advice from an experienced industry professional could end up saving you thousands of dollars over the rest of your life, and put your family in a better financial position when you pass away or if you find yourself with serious medical problems later on in life.