Personal insurance serves as a crucial safety net for loved ones in the event of an unexpected tragedy. From covering mortgage repayments, children’s education expenses, medical expenses or estate planning, personal insurance ensures that loved ones are protected and cared for in difficult times.

As the cost of living increases, so too are insurance premiums. As such, it is becoming more challenging for individuals and families to afford adequate coverage. With inflation and economic uncertainties causing a strain on personal budgets across Australia, it is more important than ever for many families to look for ways to cut costs. Fortunately, it is possible to reduce personal insurance premiums without compromising on coverage.

Understanding Factors Affecting Life Insurance Premiums

When insurers are determining personal insurance premiums, they take into account several factors such as:

  • Age
  • Gender
  • Health (including weight and any pre-existing conditions)
  • Tobacco use and alcohol consumption
  • Family history
  • Occupation
  • Participation in pastimes (such as football, cycling, netball, hockey, motor racing, horse riding, water or snow skiing, sailing, trail bike riding etc.)

All these factors will determine the premium cost at the time of underwriting. It is important to note that insurers use a variety of techniques to underwrite the individual such as personal statements (application), medical reports, blood tests and medical checks. It is important for individuals not to make a misrepresentation at the time of application as this could affect their ability to claim.

#1. Maintain a Healthy Lifestyle

Maintaining a healthy lifestyle is not only beneficial for overall well-being but can also have a positive impact on insurance premiums. Insurance companies consider various health-related factors when assessing an individual’s risk profile, and a healthy lifestyle demonstrates a commitment to minimising potential health risks.

Insurance companies are beginning to view policyholders who actively monitor their health and address any medical concerns favourably. Certain insurers may offer incentives to policy holders who can maintain a healthy body mass index (BMI) range and control blood pressure, cholesterol and blood sugar levels. Incentives can include anything to discounts on premiums to direct financial rewards.

Insurers assess an applicant’s risk at the time of application. By maintaining a healthy lifestyle, policy holders will have greater flexibility to change their existing cover or seek opportunity in the future to access alternative insurers that may be cheaper on a comparable product or have benefits that may be more suited to your needs.

When you apply for cover, once you and the insurer has accepted your terms of the policy under the contract, generally, they cannot be changed and can only be upgraded by the insurer. They cannot alter the terms of the cover, however if you do not maintain your health, after your initial acceptance, it will limit your options in the future to increase or change your cover or change insurers to seek better terms (including cost).

#2. Minimise Alcohol Consumption and Quitting Tobacco Use

Excessive alcohol consumption and tobacco use significantly increase the risk of various health conditions. Insurers consider these habits as red flags and charge higher premiums to compensate for the elevated risk. Smokers, for instance, may pay 50-100% more for their personal life insurance premiums compared to non-smokers with similar coverage and age. Under certain circumstances, you may even experience difficulties in obtaining insurance coverage altogether if you have a history of severe alcohol or tobacco use.

To secure more favourable life insurance premiums, it is essential to prioritise health by minimising alcohol consumption and quitting tobacco use. Those who prioritise their health and make conscious efforts to avoid such habits position themselves more favourably in the eyes of insurance providers, potentially leading to more competitive premium rates.

By quitting tobacco use, many insurers offer the opportunity to apply for policy re-evaluation after a period of time has passed. This allows individuals who have successfully abstained from tobacco use for a certain duration (often ranging from one to five years) to be reclassified as non-smokers. As a result, these individuals may become eligible for substantially lower premium rates equivalent to those of non-smokers, reflecting the reduced health risks associated with tobacco cessation.

#3. Engage in Safe and Low-Risk Hobbies and Pastimes

Hobbies and pastimes can have a significant influence on personal insurance premiums, as they provide insurers with insights into an individual’s lifestyle, risk tolerance, and potential exposure to hazardous activities. Certain hobbies and pastimes (such as football, skydiving, rock climbing, horse riding, or motor racing) are seen by insurers to have an elevated risk and are taken into consideration when determining coverage. Insurers can either exclude a pastime, load a premium, extend a waiting period for certain pastimes for income protection or decline cover on certain cover types.

Engaging in safe and low-risk hobbies and pastimes, such as swimming, going to the gym, and running will have no detriment to premiums. These activities are associated with a lower likelihood of accidents or injuries, which reduces the perceived risk to insurers.

Note: It’s important to note that the extent to which these lifestyle changes can impact personal insurance premiums may vary among insurance companies and policies. Additionally, the impact of lifestyle changes on premiums may also depend on an individual’s unique health history and overall risk profile.

#4. Reduce Personal Insurance Premiums Through Financial Planning Strategies

While numerous factors that impact personal insurance premiums may be beyond an individual’s control, there are specific measures that can be taken to effectively reduce insurance premiums. By combining a sound financial strategy with the most suitable policy, individuals can employ tactics to secure optimal coverage at the most competitive rates available.

Understand Specific Coverage Needs

It’s essential for individuals to understand their specific coverage requirements to ensure they are not paying for any coverage that they don’t need. Individuals should assess family requirements carefully and determine the optimal coverage amount that will adequately protect any beneficiaries without inflating premiums.

Distinct financial obligations and liabilities must also be factored into insurance policies. Take the time to assess debts, future expenses, and financial goals. A comprehensive understanding of needs will enable the selection of the most suitable coverage options while avoiding unnecessary costs.

Choose the Most Suitable Policy

The type of policy chosen will also have an impact on premiums. Each type of insurance policy has a different purpose and therefore a different cost profile. For example, life insurance is more affordable than income protection and provides essential financial support in the event of passing however, life insurance will not cover you if you become sick or injured and are unable to work.

Choosing the most suitable policy is a delicate balance between meeting your specific needs, considering your budget, and understanding the potential risks you might face. Consulting with a knowledgeable insurance professional, such as a dedicated qualified Life Risk specialist, can help you navigate these choices and ensure that the recommended policy aligns with your long-term financial goals and priorities. Remember, investing time in thorough research and expert guidance can lead to the most appropriate and effective cover for your unique circumstances.

Compare Policies and Providers

Each insurer evaluates risk differently, which results in wide variations in premium rates. It is important for you to discuss the different options available and your adviser will be able to determine which product is suitable to you taking into account premium costs.

By comparing policies from multiple providers, individuals can identify the coverage options that best align with their specific requirements. This means not paying for unnecessary coverage while ensuring adequate protection in areas that matter most.

Regular Policy Reviews

As individuals grow and evolve, so do insurance needs. Conducting periodic life insurance policy reviews is essential to ensure it aligns with current financial situation and goals. As responsibilities change, opportunities may arise to optimise coverage and reduce unnecessary costs.

Insurance premiums can fluctuate due to various factors, including changes in the insurance industry or individual risk profiles. By reviewing policies regularly, individuals can ensure that their coverage remains cost-effective by bundling policies, adjusting coverage, or taking advantage of loyalty discounts.

Maximising Insurance Coverage and Cost Options

Given the escalating premiums associated with personal insurance, individuals may be inclined to contemplate reducing or foregoing coverage. However, this could potentially expose loved ones to financial vulnerability in the event of unforeseen circumstances.

Insurance cover serves as a crucial safety net, providing financial protection and peace of mind during challenging times. Balancing the cost of premiums with the security that insurance offers is a delicate consideration. Therefore, rather than compromising on cover, individuals should explore various strategies, such as maintaining a healthy lifestyle, minimising alcohol consumption and tobacco, or engaging in safe and low-risk hobbies and pastimes, to maximise their cover and cost options. Other financial planning strategies include understanding specific cover needs, choosing the most suitable policy, comparing policies and providers as well as regularly reviewing policies.

Contact us today to review your personal insurance policy

Using a risk specialist can lead to a more cost-effective insurance policy, providing peace of mind that loved ones are adequately protected without overpaying for cover or over insuring for cover.

At PSC Life, our risk specialists possess extensive professional qualifications and knowledge of the life insurance industry and the various policies and strategies available. We navigate through a wide range of options and providers to identify the most suitable coverage for an individual’s needs. When the time comes to file a claim, our specialists are there to advocate on your behalf, and help navigate you through the claims process with the insurer. With years of expertise and dedication, you can rest assured that you will be guided by professionals who prioritise your best interests.

As a comprehensive life insurance advice specialist business, the team at PSC Life, are committed to supporting your insurance needs and helping you make informed decisions. Get in touch with our team for a comprehensive policy review and take the next step toward financial security.