How your insurance premiums are calculated

The amount and types of cover you have decided to include in your insurance will play a key role in what you are charged. You may have a combination of cover types, including life cover, income protection and total permanent disablement (TPD) cover. For more information on the different types of life insurance cover, see our previous article here.

You will also be insured for a certain amount under the benefits you’ve selected, and in the case of income protection and business expense cover, you will have a set waiting period before you can receive benefits, and a set time that you will be able to receive those benefits.

You may also have selected some optional add-on benefits as part of your cover, which may affect the price of your premium.

A range of factors about your personal situation can also affect your premium. As you get older the risk of you contracting a serious illness increases, so your premiums will be higher with age, unless you’ve chosen the level premiums option.

Factors such as your gender, general health, whether you smoke, your occupation and lifestyle will be taken into account when calculating the premium price.

When you take out life insurance, you are able to choose the premium type that best suits your needs. You can choose from stepped premiums – where your premiums are recalculated each year based on your age – or level premiums, where your premiums do not increase due to age (up to age 65). However, if you choose level premiums, your premiums can still increase for other reasons, such as indexation with inflation.

Level premiums are likely to be higher when your cover begins compared to stepped premiums.

Whether you pay your premiums monthly or annually will also affect how much you pay. If you choose to pay on a monthly basis, you will need to pay an extra administrative loading to cover the cost to the insurer of collecting your premium more frequently.

Insurance sales duties imposed by state governments should also be included as part of your premium costs, either as part of your base rate or as an additional charge. These taxes may vary depending on where you live.

For more information on how your life insurance premiums are calculated, take a look at our ClearView ClearChoice PDS.

This article is made available by, ClearView Life Assurance Limited, ClearView Life Nominees Pty Ltd and ClearView Financial Management Limited (ClearView) and intended to provide general information only. The information has been prepared without taking into account any particular person’s objectives, financial situation or needs. ClearView Life Nominees Pty Ltd is not licensed to provide financial product advice and you should seek independent financial advice and read the relevant Product Disclosure Statement (PDS) before making any decision about a product. Cooling-off periods apply. A copy of the relevant PDS can be obtained from 132 977 or on our website clearview.com.au. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs. ClearView recommends that you obtain personal financial advice and read the relevant PDS before making any decision about a product. This information does not in any way constitute tax or legal advice and before relying on this information, you should seek independent expert advice. While we have taken all care to ensure the information in this article is accurate and reliable, to the extent the law permits we will not assume liability to any person for any error or omission in the article however caused. Call (02) 8095 1494 for editorial enquiries.