When life changes, should your insurance change too? That’s the promise of adjustable life insurance. In Australia’s evolving insurance landscape, more families and individuals are seeking cover that can keep pace with their needs, especially as 2025 brings new regulatory tweaks and product innovations. But what exactly is adjustable life insurance, and does its flexibility deliver real value?
What Is Adjustable Life Insurance?
Adjustable life insurance, sometimes called “flexible premium adjustable life” or “universal life,” is a hybrid between term and whole life insurance. Unlike traditional policies, it lets you modify elements such as your premium payments, cover amount, and sometimes even the death benefit—without needing to take out a brand-new policy.
- Adjustable premiums: You can increase or decrease how much you pay each month, subject to policy minimums.
- Flexible cover: Raise or lower your cover amount as your circumstances change—think marriage, kids, mortgages, or retirement.
- Cash value: Like whole life, some adjustable policies build cash value over time, which you can borrow against or withdraw (though this may reduce your death benefit).
While adjustable life has been available in the US for decades, Australian insurers have only recently started to offer products with similar flexibility. Demand is rising as more people seek insurance that adapts to dynamic lifestyles and financial goals.
2025 Policy Updates and Market Trends
This year, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) have implemented new guidelines to ensure clarity around flexible life insurance products. Key 2025 changes include:
- Clearer disclosures: Insurers must now provide upfront, plain-English summaries of how and when policy adjustments can be made, including fees or medical evidence requirements.
- Stricter affordability checks: New rules require insurers to run more frequent affordability tests when customers alter cover amounts, aiming to avoid policy lapses and underinsurance.
- Greater digital access: Most major insurers now offer online dashboards where policyholders can request adjustments, view projections, and simulate the impact of changes on premiums and benefits.
In addition, some superannuation funds have begun piloting adjustable life cover as an option within group insurance, giving members more control over their in-super cover. This trend is expected to expand as more Australians demand tailored solutions.
Who Benefits from Adjustable Life Insurance?
The appeal of adjustable life insurance lies in its ability to match your evolving life stages. Here are some real-world scenarios where flexibility matters:
- Young families: As your family grows, you might want to increase your cover to protect dependents—then reduce it later as your savings and investments build.
- Mortgage holders: Increase your sum insured while you’re paying off the loan; scale back when you’re mortgage-free.
- Business owners: Adjust cover to match business liabilities or succession plans.
- Pre-retirees: Lower your premiums and cover as your financial responsibilities decrease.
For example, Emma and Sam, both in their early 30s, took out an adjustable life policy after buying their first home in Sydney. When they had twins in 2024, they easily upped their cover. As Emma’s business grew, she increased her premiums to build extra cash value. By 2025, with their mortgage nearly paid off, they plan to reduce their cover and premiums, freeing up cash for other investments.
What to Watch For: Costs, Complexity, and Fine Print
While the flexibility is attractive, adjustable life insurance isn’t for everyone. Here’s what to consider before signing up:
- Premiums can rise: If you increase cover or choose to pay less in early years, premiums may jump later to keep your policy in force.
- Complex features: Adjustable policies can have more moving parts than term or whole life—understand how changes impact both cost and benefit.
- Fees and conditions: Some policies charge fees for each adjustment or require updated medical information for increases in cover.
- Cash value risks: Withdrawing or borrowing against your policy can reduce the death benefit and may have tax implications.
In 2025, ASIC’s new product design and distribution obligations mean insurers must make it easier to compare adjustable policies, but it’s still crucial to read the fine print and run the numbers. Tools like online calculators (now widely available) can help you model how different adjustments affect your premiums and cover over time.
Is Adjustable Life Insurance Right for You?
Adjustable life insurance offers a rare mix of security and flexibility—particularly appealing in a world where change is the only constant. But its value depends on your financial goals, stage of life, and appetite for complexity. If you want a policy that can grow (or shrink) as your needs change, and you’re willing to stay engaged with your cover, adjustable life may be a smart move in 2025 and beyond.
