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How your choices influence the cost of your insurance

There are a lot of components that go into determining what type of insurance policy you need and how much you’ll pay in premiums to maintain your cover. It can be a highly personalised process, and that can make it tricky to understand why you might be paying a different amount to someone else.

To help you understand what you’re paying and why, we’ve broken it down into three categories: your personal risk factors, the type of insurance you choose and your premium structure.

1. Personal risk factors

During the underwriting process, we assess your history and lifestyle against a range of factors to calculate the possibility that certain life events may happen to you. The higher your level of risk for these factors, the higher your premiums are likely to be.

Here are some of the personal risk factors that can influence your premiums:

  • Age - some illnesses become more likely as you get older.
  • Gender  - each gender has its own risk factors, so men and women generally pay different premiums.
  • Occupation - for example, working in a mine carries more risk than working as a retail assistant.
  • Health factors - a high Body Mass Index (BMI) can be an indicator of poor health.
  • Dangerous hobbies - for example, sewing is less risky than skiing.
  • Smoking - smoking increases your risk of illness and disease.
  • Medical history - hereditary factors, or conditions developed in your lifetime, can increase your risk of becoming ill or injured later in life.
  • Your home state - each state government taxes insurance transactions differently.

 

2. The type of insurance you choose

Your life insurance policy has been designed with a lot of different features that you can pick and choose from, so it fits your lifestyle and needs. Some of these features may increase the cost of your insurance:

  • Types of cover
  • The amount you’re insured for
  • Premium frequency (i.e. monthly or annually)
  • Waiting period before you can receive any benefits
  • Annual inflation adjustment to keep up with the cost of living

 

3. Your premium structure

Everyone’s financial situation is different. That’s why Resolution Life offers different ways for you to pay your insurance premiums.

Variable premiums (formerly level premiums)

  • Variable premiums don’t increase each year as the insured person gets older and generally stay the same for each layer of cover during the term of your plan. However, they may increase and are not guaranteed to stay the same as when your policy commenced.  
  • Variable premiums will increase if you increase the sum insured or you’ve selected automatic inflation increases for your plan or if we review the premium rates for your product as a whole. A layer of cover is made up of your initial sum insured and additional layers are made up of any increases in sum insured you apply for or increases due to any automatic inflation 
  • Variable premiums change to variable age-stepped premiums from the first extension date after the insured person turns 70 (or earlier if nominated). Premiums (and any applicable fees or government charges) can change, regardless of the premium type. If Resolution Life review base premium rates, any change in the base premium rate will apply to all plans of the same type  
  • A variable premium structure may be suitable for customers who plan on holding their cover for a long time. This type of premium has higher premiums upfront, and lower premiums in the longer term, compared to variable age-stepped premiums. This premium structure is not suitable for customers who think they may cancel their policy early due to  higher premiums in the early years .  

Note: Variable premium is the new name for ‘level premium’. This is a change of name only and does not change how the premium structure works. The new name applies for all new policies issued from 16 December 2024.  

Example

Van and Thi, both aged 40, have two children aged 10 and 12. The couple run a small family business and are paying off a mortgage.

Van and Thi both have Death and TPD cover, which will pay them a lump sum if one of them passes away, becomes terminally ill or becomes permanently disabled. However, they’re concerned that if either of them gets temporarily sick or injured, the other person won’t be able to manage the business alone.

After talking to a financial adviser, they decide to take out Income Protection insurance as well. This will provide them with a monthly payment of up to 75% of their income if they were to become sick or injured.

The couple looked carefully at their premium payment options and decided to pay level premiums. This could make it easier for them to plan their budget. While paying level premiums was initially more expensive than another option, they prefer the peace of mind and not having to pay the high premium rates when they are older.

Please note this example is illustrative only and is not an estimate of the insured amount you will receive or fees and costs you will incur. This example is based on the following assumptions (a) the cover amount remains the same throughout the period and the policy is not cancelled or suspended and (b) No waiting period applies to the policy.

What you need to know

Any advice on this website is provided by Resolution Life Australasia Limited ABN 84 079 300 379, AFSL No. 233671 (Resolution Life), and is general advice and does not take into account your objectives, financial situation or needs. Before acting on this advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, as well as the relevant product disclosure statement and/or policy document, available from Resolution Life at resolutionlife.com.au or by calling 133 731, before making a decision on whether to acquire, or continue to hold, the product.

The Target Market Determinations (TMDs) for our financial products (where applicable) can be found at Target Market Determinations (TMDs). The TMDs describe the key features and attributes of an applicable product that affect whether it is likely to be consistent with the objectives, financial situation and needs of consumers in the target market.

If you decide to purchase or vary a financial product, Resolution Life and/or other companies within the Resolution Life Group will receive fees and other benefits, which will be a dollar amount or a percentage of either the premium you pay or the value of your investments. You can ask us for more details.

Resolution Life is part of the Resolution Life Group and can be contacted via contact-us or by calling the phone number mentioned above.

Life Insurance Code of Practice

The Life Insurance Code of Practice is issued by the Financial Services Council (FSC) and sets out the life insurance industry’s commitment to high customer service standards, consistency and principles of conduct. You can find more information here.