How to Keep Your Insurance Premiums Affordable Without Sacrificing Coverage

Insurance provides essential protection at every life stage—whether you’re building a career, raising a family, or planning your retirement. But managing rising premiums while ensuring adequate coverage can feel like a balancing act. Fortunately, whether you’re 20 or 70, there are proven strategies you can use to keep your premiums affordable without compromising your security.

1. Understand What Affects Your Premiums

Insurance premiums aren’t arbitrary—they’re shaped by several factors:

Age and Health: Premiums generally rise with age because insurers consider older people a higher risk. Health and lifestyle choices, such as smoking, excessive alcohol use, or weight also significantly affect premiums.
Coverage Type and Amount: Costs vary based on the types and amount of cover, such as life insurance, Total and Permanent Disability (TPD), trauma cover, and income protection.
Policy Structure (Variable Age-Stepped vs Variable^):
- Variable age-stepped premiums (previously stepped premiums) start lower but increase yearly, often substantially in later years.
- Variable premiums (previously level premiums) are initially higher but remain consistent, potentially offering significant savings if cover is taken out early enough and held for many years. (MoneySmart, 2024).
Insurance Inside vs Outside Superannuation: Holding insurance inside your superannuation can offer cash-flow advantages and potential tax efficiencies, which may be particularly beneficial for older Australians managing retirement savings (ATO, 2024).

^ NOTE : Recently terminology for premium structure was changed. “Stepped” premiums are now “variable age-stepped” premiums, and “level” premiums are now “variable premiums”. This change, mandated by the Council of Australian Life Insurers (CALI) and implemented by 31 December 2024, aims to be more transparent about how premiums can change, particularly as they relate to age.

2. Choose the Right Type and Amount of Coverage

Tailoring your insurance coverage to your current circumstances can reduce unnecessary costs:

Avoid Over-Insuring: Assess your financial obligations realistically. For example, younger people with mortgages and dependent children may require higher coverage levels, whereas older Australians with independent adult children and lower debts can often reduce coverage safely (Canstar, 2024).

Policy Bundling: Many insurers offer discounts when combining policies such as life, TPD, and income protection, resulting in meaningful savings.

3. Adjust Your Policy Features to Reduce Costs

Simple policy adjustments can have a significant impact:

Waiting Periods: Extending the waiting period on income protection from 30 days to 60 or 90 days can substantially lower your premiums. This option works best if you have sufficient emergency savings to cover the lack of income whilst you are unable to work, as well as pay for any day-to-day expenses plus all incoming medical expenses (MoneySmart, 2024).
Benefit Periods: Reducing benefit periods from “until age 65” to shorter durations such as two or five years can also notably reduce premiums, especially for those nearing retirement. This may not be the right choice for those who still have many more years to work.

Higher Excess: Reviewing and removing some of your policy “extra features”may also reduce the premium. But don’t be overzealous! Should it some time to claim, you may wish that you had kept some of these benefits.

4. Take Advantage of Discounts and Tax Benefits

Strategically using available discounts and tax incentives is beneficial at any life stage:

Multi-Policy Discounts: Insurers typically reward customers who bundle multiple policies, often reducing total premium costs by 10–15% (Canstar, 2024).

Annual Payments: Choosing annual premium payments instead of monthly instalments can reduce administration fees, saving around 5–8% each year (Financial Services Council, 2024).

Tax Deductions: Income protection premiums paid outside superannuation are usually tax-deductible, providing valuable tax savings (ATO, 2024).

5. Maintain a Healthy Lifestyle

Your health significantly impacts your insurance costs:

Quit Smoking: Smokers pay on average twice as much in premiums compared to non-smokers. Quitting can quickly and dramatically reduce premiums (Canstar, 2024).
Regular Exercise and Balanced Diet: Maintaining fitness, weight, and overall health not only improves quality of life but also your medical underwriting outcomes—leading directly to lower insurance premiums.

Tip: Think of your health as an investment portfolio; regular maintenance ensures greater long-term returns.

6. Regularly Review and Update Your Policy

As you move through life’s different cycles, so will your insurance cover need to evolve with you. Regular reviews are critical to ensure your policy remains appropriate and cost-effective:

Life Events: Marriage, children, mortgage repayment, career changes, or retirement significantly impact insurance requirements. Regular reviews during these milestones prevent you from paying unnecessary premiums (Financial Services Council, 2024).
Professional Advice: Consulting a financial adviser regularly ensures your insurance aligns precisely with your financial situation, preventing costly oversights or gaps in coverage. Plus, your Financial Adviser should always be up-to-date on what products are currently providing the most competitive terms on the market. They may be able to shop around different providers and find you better terms or cheaper premiums for the same amount of cover. (MoneySmart, 2024).

Final Thoughts

Balancing affordability and adequate insurance protection is achievable, no matter your age or stage of life. By understanding factors affecting premiums, accurately assessing your coverage needs, making strategic policy adjustments, capitalising on discounts, adopting a healthier lifestyle, and undertaking regular policy reviews, you can keep your premiums manageable without sacrificing essential protection.

At Central Coast Financial Group, our experienced financial advisers specialise in assisting Australians aged 30 to 70 with personalised insurance solutions. Don’t leave your financial future to chance—get tailored advice to ensure optimal protection at the right price.

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