Factors that Impact Your Death Insurance Premiums

While safeguarding our finances is very necessary, it is also important to have safeguards and support in place for our lives. The best way to achieve that is to purchase death insurance. In Australia, death insurance still does not cover as many people as it should. In addition, many people with death insurance do not have sufficient levels of life cover.

Purchasing death insurance for the first time can be complex, which is why our advisors at Death Insurance Melbourne are here to give you a helping hand and advise you on the death insurance options that are available and best suit you.

Term Death Insurance – An Easy Way for Purchasing Cheap Death Insurance

One form of death insurance that is worth considering to assist you in times of need is term death insurance.

A Term Death Policy will pay a lump sum benefit in the event the life insured passes away while the policy is in force. Alternatively, it will pay a benefit if the life insured becomes terminally ill and is diagnosed with less than 12 months to live.

To determine the coverage you need to purchase this policy, you would need to assess your current expenses and debts, as well as future ones. Depending on your circumstances, you might need to give a medical test too.

Purchasing term death policies is essential for people with dependant family members. This is especially so if the policyholder happens to be the main breadwinner for the family. If the policyholder were to pass away, the family would unfortunately lose its main source of income. This would result in more than just an emotional loss. It could also result in financial hardships and uncertainty for the family.

Because there are so many considerations to take into account, you would need to consult your insurance adviser to assist you in obtaining the right amount of cover for your situation. 

Is Death Insurance needed when there are no dependants?

If you have no dependents or financial obligations in your life, you might have no need for death insurance. You might feel that securing income protection insurance is more suitable because it would ensure that you have the funds for managing your living expenses if you become ill or injured, and are as a result, unable to work.

Many people in Australia buy income protection insurance to assist them if they are unable to work because of an illness or an accident, though there are other important factors to take into account before dismissing your need for death insurance options.

The most important factor to note is that death insurance can help ensure that your debts and funeral expenses are covered, even if you don’t have any dependants. You can trust that any loose ends will be tied up when you have adequate death insurance in place.

The Types of Premiums Available in Death Insurance Policies

Once you are ready to buy death insurance, your insurer might ask you what kind of premiums you would prefer to pay. Usually, death insurance companies in Australia offer two kinds of premiums. These are:

• Level Premiums

Level premiums remain fixed for the same sum insured, regardless of your age. When you fill an application form for death insurance, the insurance company calculates your premium rates at the time of the application. The insurer would then lock in this rate for the lifetime of your policy (unless there is an across the board rate change, something that doesn’t happen very often).

Therefore, say you purchased a death insurance policy of $500,000 at 25 years of age, your premium would remain the same for that $500,000 even when you are age 50. Level premiums tend to become more affordable the older you get and can offer significant cumulative savings over time. 

• Stepped Premiums

Stepped premiums, on the other hand, keep rising as you age. This is because the likelihood of you reporting a claim increases with your age – especially as your health would start deteriorating as you age. These premiums are more affordable when you purchase the policy, therefore this is the preferred option for people who have a limited disposable income. 

What Factors Affect the Premium You Pay for Death Insurance?

It is vital to take all factors into account that will affect the premium you will pay for death insurance. The premium structure you decide to choose would determine the premium you need to pay. However, there are other factors, which have a significant bearing on your premiums as well. These include:

• Your Gender: Data shows that men have a higher risk of suffering from adverse medical conditions later in life. Hence, they pay higher premiums than women do.
• Your Age: The older you become, the greater your premium would be.
• Your Health: If you suffer from some pre-existing medical conditions, your premium rates would be higher.
• Your Lifestyle: If you smoke or consume alcohol regularly or have a higher Body Mass Index (BMI) than the average person, your premium rates would be higher.
• Your Occupation: If you work in high-risk environments, you might need to pay heavily loaded premiums or face difficulties in obtaining insurance.
• Your Hobbies: If you enjoy dangerous hobbies like bungee jumping, you would need to pay a higher premium.

When you are ready to take death insurance seriously and consider purchasing a policy, speak to one of our advisers at Death Insurance Melbourne to discuss your options. We would be more than happy to help you!