Item 2 · Premiums
Premiums over time
A funeral insurance premium is usually not a fixed price. Moneysmart says premiums rise after age 50 and then each year with inflation, and that because they are paid for life, the total can end up larger than the benefit the family receives. How a particular policy’s premium moves is written into that policy’s own documents, and this item explains what to look for there.
Not financial advice, and no premium on this page is a quote or an example price. For the official guide, see Moneysmart’s funeral insurance page; for a premium that seems wrongly charged, see AFCA after raising it with the insurer.
Three shapes a premium can take
The drawing shows the general shape of three kinds of premium described by ASIC and Moneysmart. It has no scale and no amounts, on purpose: real premiums depend on the policy, the age of the person insured and the size of the benefit.
The stepped shape is the usual one: ASIC’s 2015 snapshot of funeral insurance found that premiums usually rise as the insured person ages. The level shape, a premium meant to stay the same for the life of the policy, was among the improved features ASIC saw some insurers adding to new funeral products during and after its review. The third, premiums that stop at a set age, was already a feature of some policies; ASIC gave 90 as an example. Moneysmart, writing about life insurance in general, has its own names for the choice (variable age-stepped premiums and variable premiums) and says that whichever is used, premiums are not guaranteed and can change from year to year.
| What moves it | What the sources say | Where it is written |
|---|---|---|
| Age | ASIC found premiums usually rise as the insured person ages, and that they depend on age, sometimes gender, and the benefit amount. | The PDS, and the illustration of stepped premiums the Life Code says a subscribing insurer will give. |
| Automatic benefit increases | The benefit often grows each year with the consumer price index or by a fixed amount such as 5%, and people can sometimes opt out. ASIC noted that even premiums sold as “fixed” often rise along with the benefit under this kind of inflation protection. | The PDS. |
| A premium-ending age | In some policies premiums stop at a specified age. | The PDS. |
| Level or capped designs | ASIC reported that some insurers had brought in premiums intended to stay level for the life of the policy, and premiums capped at the sum insured. | The PDS. Whether a policy offers these is a feature of that policy. |
| Changes the insurer makes | For life insurance, Moneysmart says premiums are not guaranteed and may change each year. | The PDS and any notice of change. |
When the total passes the benefit
Because premiums keep coming for as long as the cover lasts, Moneysmart warns that someone who lives another five to ten years may pay more in premiums than the funeral costs. ASIC’s 2015 report recommended that insurers give people an upfront estimate of a policy’s total cost, and say clearly and prominently when total premiums could come to more than the benefit.
The Life Code, in the version in effect from 1 March 2025, covers similar ground for insurers bound by it. When a subscribing insurer offers a funeral policy it will explain level and stepped premiums with an illustration of how stepped premiums might rise, and say where the total premiums could exceed the benefit. If someone buys a policy with stepped premiums, it will explain how they may increase and warn about whether they will stay affordable if income changes, for example on retirement or moving into aged care.
Moneysmart asks people to think about future income before taking out cover, because premiums can become hard to pay on the Age Pension. ASIC’s report also recorded that, in 2013, a coalition of 11 consumer and older-Australian advocacy groups asked insurers for fixed premiums, an estimate of total cost, capped products and longer arrears periods, so that a missed payment would not end the cover after 28 days.
When a premium looks wrong
Moneysmart and AFCA both point to raising it with the insurer as the first step, and Moneysmart’s next step after that is a formal complaint in writing (Item 6 covers the steps). AFCA says it can consider insurance complaints about premiums that were wrongly charged and about information that was not disclosed, or was misleading or incorrect.
There is a limit worth knowing. AFCA generally does not consider a complaint that is only about how high a premium is. It can consider one where the cost was not disclosed, was misrepresented or was applied incorrectly, or where the firm has breached a legal obligation. On this guide’s reading, that puts the policy documents, and what was actually charged, at the centre of any complaint about a premium.
Reading the numbers that do exist
The premium for a particular policy, and how it is set to change, is in that policy’s PDS and the papers sent once the cover starts. The Life Code says that before the cooling-off period ends, a subscribing insurer will send documents that set out the premium and how premiums are structured. Those papers hold the only reliable figures for any one policy.