Page 7 - Advice Matters Magazine - FWP - Dec 24

How your insurance premiums are calculated

The amount you pay for your life insurance – able to receive those benefits. (previously known as level premiums), where your
usually each month or year - is called a premium. You may also have selected some optional add-on premiums do not increase due to age (up to age
Before you purchase your insurance, you’ll be benefits as part of your cover, which may affect the 65). However, if you choose variable premiums,
provided with a quote which will estimate how price of your premium. your premiums can still increase for other reasons,
much you will pay in premiums. such as indexation with inflation.
Your personal circumstances
So how do life insurance companies decide the A range of factors about your personal situation Variable premiums are likely to be higher when
amount they will charge you? There are a number your cover begins compared to variable age-
of factors that typically go into the final cost of can also affect your premium. As you get older the stepped premiums.
your premium. risk of you contracting a serious illness increases, Your payment frequency
so your premiums will be higher with age.
Your level of cover Whether you pay your premiums monthly or
Factors such as your gender, general health,
The amount and types of cover you have decided whether you smoke, your occupation and lifestyle annually will also affect how much you pay. If you
to include in your insurance will play a key choose to pay on a monthly basis, you will need
role in what you are charged. You may have will be taken into account when calculating the to pay an extra administrative loading to cover
a combination of cover types, including life premium price. the cost to the insurer of collecting your premium
cover, income protection and total permanent Your premium type more frequently.
disablement (TPD) cover. When you take out life insurance, you are able Government taxes
You will also be insured for a certain amount to choose the premium type that best suits your Insurance sales duties imposed by state
under the benefits you’ve selected, and in the case needs. You can choose from variable age-stepped governments should also be included as part of
of income protection and business expense cover, premiums (previously known as stepped premiums) your premium costs, either as part of your base
you will have a set waiting period before you can – where your premiums are recalculated each rate or as an additional charge. These taxes may
receive benefits, and a set time that you will be year based on your age – or variable premiums vary depending on where you live.

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