Life insurance is designed to provide a financial safety net if you were to:
During difficult times, this type of insurance can offer a lump sum of money that could help your family afford their debts (e.g. their home loan) and living expenses (e.g. school fees) – even if you weren’t able to support them.
So, how much life insurance do you need? It’s simple enough; you need to be insured for the amount required to maintain the lifestyle your family has grown used to.
For some, this means getting insured for the difference between two variables. The first variable is what your family receives in:
The second is any debts or living expenses they might have to pay.
Term life insurance could help financially support your beneficiaries (e.g. your family) if you were to pass away or receive a terminal illness diagnosis. This policy is a common type of life insurance offered by Australian insurers.
When you take out life insurance, you sign a contract with an insurer and agree to pay the policy premiums regularly. In exchange, your insurer pays a lump sum of money to your listed beneficiaries (e.g. spouse, children) if you pass away, become seriously ill or injured or become permanently disabled in accordance with the policy’s Product Disclosure Statement (PDS). Life insurance must be purchased before any of these instances occur.
Life insurance either covers you for an agreed-upon term (e.g. for the next 10 or 20 years) or, for some insurers, until you reach a certain age. This type of cover is also usually risk-rated, which means your premiums will be calculated based on how likely you are to make a claim; as such, life insurance may cost more for high-risk individuals.
Also, you may need to sit through waiting periods before you can claim on your life insurance. Waiting periods will be clearly outlined in your Product Disclosure Statement (PDS).
How much life insurance costs in Australia, on average, will vary between each person. The cost of life insurance is based on your age, gender, health, smoking status, occupation, lifestyle and other risk factors. How much your life insurance costs will also depend on the type of policy, what your policy covers, and whether you choose stepped or level premiums.
For example, you can typically lock in a cheaper rate with a level premium structure. However, level premiums typically still change in line with inflation (CPI) and generally change if:
On the other hand, a stepped premium usually starts out cheaper than a level premium but gets more expensive as you get older. You may wish to consider whether you’d prefer cheaper premiums now (stepped) or more affordable premiums over time.
To determine how much life insurance may cost you, you can compare life insurance quotes using our online comparison service.
This is a decision you’ll need to make based on how you believe your family will cope financially if you weren’t able to support them.
Specifically, you may need to consider how your family could fare if they needed to pay off debts or cope with regular expenses without your income.
Life insurance also allows you to leave an inheritance to help your children get ahead if you’re no longer around.
You’ll need to take out a policy before a covered event occurs, like a severe injury, for example. So, if you become seriously injured and then take out a life insurance policy, you wouldn’t be able to claim this injury on your cover.
It’s also worth noting that many superannuation funds include a level of life insurance. Unsure if you already have life insurance through your superannuation? Call up your super fund to check, as that cover may be insufficient for your needs.
If you’re wondering if life insurance is worth it for you and your family, consider these four reasons why Aussies may take out cover:
Remember: each person’s circumstances are unique, so you should make your decision based on what’s right for you.
Even if you are more likely to claim on a life insurance policy than someone else, you may still be able to take out cover. However, life insurance for high-risk individuals will usually cost more.
To determine if you’re a high-risk individual, and how much you’ll pay for such a policy, insurers will typically assess your occupation, health, lifestyle and hobbies.
Some examples that may categorise you as a high-risk individual include:
Women’s life insurance may cost less than men’s because – compared to men – they:
Insurers will consider these factors when they’re calculating life insurance premiums for women.
That said, all risk-rated insurance products are priced based on the risk of the individual, male or female. So, if a woman leads a risky lifestyle, is older, or has medical conditions that might lead to a claim in the future, there’s every chance she may pay more for life insurance than a man who is considered ‘less risky’.
If you’re curious about what you’ll pay for life insurance, one of the easiest ways to find out is to get a life insurance quote using our comparison service.
No, you can’t claim any tax deductions for life insurance premiums. However, income protection insurance premiums can be tax-deductible, as it protects against loss of income; not life. You should talk to a qualified tax specialist to determine what you’re able to claim on tax each financial year.
Please note: This information is provided for information purposes only and does not constitute tax advice.
Life insurance optional benefits typically cost extra to add on and generally need to be underwritten into your policy during the application phase.
Some common features include:
‘Riders’ are optional features that you can add to your life insurance policy. Although policy riders cost extra, they provide you with additional life insurance coverage; including accidental death, illness contracted from a needle, costs for further rehabilitation and home bed care, and life insurance coverage for children.
However, you may not be able to attach riders to your life insurance policy if the insurer considers you particularly risky to insure (e.g. if you’re over a certain age, employed in a high-risk field).
How much extra a policy rider might cost largely depends on your existing level of risk. You’ll have to decide if the extra expense is worth the additional cover, and ask your insurer what the price difference could be.
Not every insurer offers every single type of policy rider, but here’s how some policy riders work:
If you want to add a life insurance policy rider to your cover, ask your insurer what they offer.
If you’re looking to purchase life insurance and you have a medical condition that significantly impacts how you live, there’s a good chance it will be classified as a pre-existing condition.