Understanding life insurance premium structures: age-based calculations, premium types, risk factors, and the importance of early coverage.
Complete guide to life insurance in Australia covering types, costs, and how to apply
Calculate your exact coverage needs with 3 proven methods and real Australian examples
Detailed comparison of retail vs super life insurance: TPD definitions, costs, portability
Here's the honest truth: life insurance gets more expensive as you get older. But here's the good news: it's predictable expensive. Understanding why costs increase and how much to expect helps you make smart timing decisions that could save you tens of thousands of dollars.
Insurance companies base costs on one simple fact: the older you are, the higher the statistical risk that they'll need to pay a claim. This isn't guesswork—they use actual death statistics (Australian Life Tables) compiled over decades to calculate risk for every age group.
This guide explains what drives your life insurance costs, the difference between premium types (stepped vs level), and practical strategies to keep costs manageable. Whether you're 25 and thinking about your first policy or 50 reviewing what you have, understanding the math helps you decide when to buy and what type makes sense for your situation.
Important: This is general information only. You should consider whether life insurance is appropriate for you and seek personal advice from a licensed financial adviser before making decisions.
Life insurance costs depend on several factors, but they all come down to one question: "How likely is the insurer to need to pay out?" The higher your risk, the higher your premium.
The big ones:
The smaller ones that still matter:
The good news? Most of these factors you either can't change (age happens, gender is what it is) or can change strategically (quit smoking, lose weight, change jobs). We'll cover the ones you can control later.
Life insurance premiums don't increase smoothly year by year. Instead, they jump faster and faster as you age—and here's why:
Mortality risk roughly doubles every 7-10 years. That's the core insight. It's not that a 50-year-old is 10% more likely to die than a 49-year-old—it's that mortality compounds over time.
Think of it like compound interest, but working against you. If someone at 25 has a mortality risk of, say, X%, then by age 35 it's roughly 2X%, by 45 it's 4X%, by 55 it's 8X%, and so on.
What this means for your premiums on a stepped policy (the most common type):
So a 30-year-old might see their premium go from $50 to $55 one year (a $5 increase). A 55-year-old seeing a similar percentage increase might see their premium go from $500 to $560 (a $60 increase). The percentage is similar; the dollars are very different.
After age 50 it accelerates further because that's when serious health conditions (heart disease, cancer, diabetes) start becoming common. The statistics reflect reality: your health profile changes more dramatically in your 50s than in your 30s.
Here's a practical example: A 30-year-old non-smoker might pay $40/month for $500k coverage. That same person as a smoker? Around $80-90/month. That's roughly double.
Why? Smoking dramatically increases your risk of heart disease, cancer, and stroke—the three things that kill people. Insurers price accordingly.
The smoking multiplier is:
Younger smokers get hit harder as a percentage. Older smokers get hit hard in absolute dollars (because the base rate is already high).
Important: Insurers classify you as a smoker if you've used tobacco or nicotine in the past 12 months. This includes:
The good news—and it's genuinely good: After 12 months smoke-free, you can request to be reclassified as a non-smoker. Most insurers just need a signed declaration, though they may ask for medical evidence (blood test). The premium drops immediately and permanently.
Do the math: If quitting saves $40-50/month, that's $480-600 per year. It pays for medical tests and then some.
Women pay 20-40% less than men for the same coverage. The reason is straightforward: women live longer. Australian women have a life expectancy of 85.4 years versus 81.6 years for men (about a 4-year difference). More importantly for insurance pricing, women have lower death rates at every single age from 25 onwards.
This isn't discrimination—it's basic statistics. The same logic means women sometimes pay more for trauma/critical illness cover (they're statistically more likely to survive and claim), but less for life and disability cover.
The difference is largest in the 35-50 age range, where women typically pay 30-35% less than men.
Here's something that surprises people: doubling your coverage amount doesn't double your cost.
Why? Because insurers have fixed costs (paperwork, underwriting, management) whether you're insuring $250k or $1M. So:
The practical takeaway: Don't buy less coverage than you need just to save money. A smaller policy actually costs you more per $1,000 of cover. If cash flow is tight, it's better to buy the full coverage you need than to buy a smaller amount at a lower total cost.
This decision matters more than most people realize because it affects not just your next year's cost, but your total cost over the life of the policy.
Stepped premiums: Start cheap and go up every year, typically by 7-10% annually. You're paying the "current" rate for your current age. At 35 you pay a 35-year-old rate; at 45 you pay a 45-year-old rate.
Level premiums: Start higher (often 40-60% higher than stepped), but stay flat for a fixed period (usually to age 65, 70, or 75). No annual increases during that period.
Here's what actually happens:
Years 1-15: Stepped premiums cost less. You're paying lower rates early on.
Years 15-20: They're roughly even.
Year 20+: Level premiums become cheaper because stepped premiums have been compounding for 20+ years, and those increases have stacked up.
The crossover point (where level becomes cheaper) is typically around year 15.
But here's the catch: When your level period ends at, say, age 65, your premium converts to stepped rates for your age at that time. That conversion can be shocking. You might jump from $110/month to $800+/month almost overnight.
Go with stepped premiums if:
Go with level premiums if:
The honest truth: Level premiums only make financial sense if you actually keep the policy 15+ years. Don't buy them thinking you might cancel early—you'll end up overpaying.
The cost per $1,000 of cover decreases as you purchase larger coverage amounts. This "economy of scale" effect exists because insurers have fixed costs (underwriting, paperwork, management) regardless of whether you're insuring $250k or $1M.
If you double your coverage, your premium doesn't double. Instead:
The takeaway: Don't buy less coverage than you need just to save money. You'll end up paying more per $1,000 of protection.
The factors you can't control (age, gender) are fixed. But several factors you can control. Here's where you can actually save money:
This is the single most important decision. Buying at 30 instead of 40 can save you 30-40% on level premiums, and 60-70% over the lifetime of a stepped policy. Every year you wait, costs increase.
The hidden risk: If health issues develop before you apply—high blood pressure, weight gain, diabetes diagnosis—you'll face loadings or exclusions. Apply while you're healthy.
If you smoke, quitting is the single biggest cost-reduction opportunity available. After 12 months smoke-free, you can request reclassification as a non-smoker. The savings are substantial.
Most insurers just need a statutory declaration, though they may ask for medical evidence (blood test). The reduction is effective immediately.
New applications are underwritten based on your current health, unlike existing policies. You can strategically improve health before applying:
Premium variation between insurers for identical coverage is 20-30%+. Don't accept the first quote. Our comparison tool shows you side-by-side pricing from 8 major Australian insurers.
If you plan to stop coverage in 10-15 years (when kids are independent and mortgage is paid), stepped premiums cost significantly less total. You won't keep it long enough for the compounding to catch up.
Buying life, TPD, trauma together typically saves 15-25% compared to separate policies. But only buy what you need—the savings don't justify unnecessary cover.
Due to how costs compound (doubling every 7-10 years), the first 15 years of a policy are incredibly important. This is why buying at 30 instead of 40 saves so much—you lock in a decade and a half of lower rates.
The compounding effect:
The later decades cost far more cumulatively. This is why delaying even 5 years can cost you tens of thousands over a 30-year policy.
Many people wonder if they should keep coverage in retirement. The honest answer: it depends on your goals.
You can drop it if:
You might keep it if:
Strategic approach: Many advisers recommend reviewing at retirement and reducing coverage to modest amounts ($100-200k) to cover specific goals like funeral costs and a small inheritance, rather than maintaining full coverage at very high cost.
The cheapest premium is meaningless if claims are denied when you need them. Here's what actually matters:
Terminal illness benefit: Check if it's 12 months or 24 months. The difference can matter significantly for some conditions. A 24-month definition is more valuable and typically costs 3-5% extra.
TPD definitions: Own Occupation (pays if you can't do your specific job) is better than Any Occupation (pays only if you can't do any job). Worth paying 10-20% more for Own Occupation if you have a specialized career.
Trauma coverage: More conditions aren't always better—focus on how conditions are defined. A policy with 50 well-defined conditions is better than 70 loosely-defined ones.
Research actual claims performance:
A 10-15% premium difference is worth paying if it means higher claim acceptance and faster service.
Life insurance premiums are based on mortality risk—the statistical likelihood that the insurer will need to pay a claim. As we age, mortality risk increases exponentially, not linearly. A 60-year-old is statistically much more likely to die in the next year than a 30-year-old.
Insurers use Australian Life Tables published by the Australian Government Actuary, which compile national death statistics by age and gender. These tables show that mortality rates roughly double every 7-10 years, which is why you see stepped premiums increasing by 7-10% annually—they're compounding to match the exponential mortality curve.
The acceleration after age 50 reflects the rapid increase in age-related health conditions: cardiovascular disease, cancer, and other chronic conditions become significantly more common in your 50s and 60s.
No—women consistently pay 20-40% less than men for life insurance at all ages. This is based on mortality statistics showing women have longer life expectancy and lower mortality rates at every age bracket.
According to the Australian Bureau of Statistics, female life expectancy at birth is 85.4 years compared to 81.6 years for males (a 3.8-year difference). More importantly for insurance pricing, women have lower mortality rates at every single age from 25 to 85.
This isn't discrimination—it's actuarially-based pricing reflecting real statistical differences. The same principle means women often pay more for trauma insurance (because they're more likely to survive a critical illness) while paying less for life and TPD cover.
Smoking increases life insurance premiums by 50-100%, depending on your age:
You're classified as a smoker if you've used any tobacco or nicotine-containing products in the past 12 months, including cigarettes, cigars, pipes, vaping with nicotine, or nicotine replacement therapy beyond the first 3 months of quitting.
The good news: you can be reclassified as a non-smoker after 12 months smoke-free. Contact your insurer, complete a declaration, and they may request medical evidence (blood test for cotinine). The premium reduction is immediate and permanent as long as you remain smoke-free.
The financial incentive is substantial—combined with obvious health benefits, quitting smoking is one of the most economically rewarding health decisions you can make in terms of insurance costs.
Level premium structures lock in your rate for an extended period—typically to age 65, 70, or 75—but not forever. After the level period ends, premiums convert to stepped rates at your then-current age.
This conversion can be jarring. If you've been paying $110/month for 30 years, suddenly facing $820/month at age 66 is a significant shock, even though you've saved money overall. Many people cancel policies at conversion, which is unfortunate if they still need coverage.
Some insurers offer "guaranteed premium rates" that lock in premiums for life, but these are typically 80-100% more expensive than standard level premiums and are rarely cost-effective. The math only works if you're certain you'll maintain coverage until death and you value premium certainty very highly.
Best strategy: Choose level premiums if you plan to keep coverage for 20+ years and understand the conversion that happens at the end of the level period. Plan your coverage to end around retirement (when financial dependents are typically independent and mortgages are paid), avoiding the high costs of post-65 insurance.
See exact premium costs from 8 major Australian insurers based on your age, health, and coverage needs. Free comparison takes 3 minutes.
Compare Quotes NowLife insurance costs are predictable. They increase with age because mortality risk increases with age. That's not negotiable. But you have real control over when you buy and what type you choose—and those decisions can save you tens of thousands of dollars over a lifetime.
Here's what matters most:
Buy young. Buying at 30 instead of 40 can save you 30-70% depending on the policy structure. Every year you wait costs you money. If you're on the fence, get a quote today to see what rates you'd lock in.
Choose the right structure. Stepped premiums if you plan to stop in 15 years (cheaper total). Level premiums if you genuinely plan 20+ years (more expensive upfront, cheaper long-term).
Don't smoke. If you do, quitting after 12 months can cut your costs in half. That's the single biggest cost-reduction lever available to you.
Compare multiple insurers. Prices vary by 20-30%+ for identical coverage. Don't accept the first quote.
Don't buy on price alone. A 10-15% premium difference is negligible compared to claim acceptance rates and processing speed. Research insurer reputation, not just cost.
Ready to see what you'll pay? Our quote calculator shows you side-by-side pricing from 8 major Australian insurers in under 3 minutes.
General Advice Disclaimer: This information is general in nature and does not take into account your individual circumstances, objectives, or financial situation. You should consider whether life insurance is appropriate for your needs and seek advice from a licensed financial adviser before making decisions about insurance coverage. Insurance premiums shown are indicative only and may vary based on individual circumstances and insurer underwriting.