Explore Life Insurance

With life insurance, even if the worst happens, you can rest easy knowing that your family can be financially supported after you’re gone.

What is the purpose of life insurance?

Life insurance is an agreement with your insurer that if you die or are diagnosed with a terminal illness, you or your chosen beneficiary could receive a lump sum payout.

Financial obligations, such as mortgage repayments, everyday living expenses, funeral costs, children’s education fees and debts, should all be considered when discussing a suitable life insurance policy.

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What are your options with life insurance?

There are four main types of life insurance cover. The right option for you depends entirely on your circumstances and needs. Like most insurance policies, choosing a higher level of cover will cost you more, but it usually offers a broader level of financial protection.

Term life insurance

Otherwise known as ‘death cover’, this level pays a set lump sum when you pass away or are diagnosed with a terminal illness. The sum of money goes to the people nominated as your beneficiaries on your policy.

Total and permanent disability cover (TPD)

TPD insurance can be taken out in conjunction with a life insurance policy, or as an individual product. This cover pays a lump sum in the case of serious injury or illness resulting in permanent disablement. This money is designed to support you with rehabilitation and living costs if you cannot return to work.

Trauma cover

If you’re diagnosed with a serious illness or injury, such as cancer, heart disease, stroke, and other life-threatening conditions, trauma cover can help. Also known as ‘critical illness cover’, trauma insurance pays a lump sum if you suffer a defined major medical incident.

Income protection

An income protection policy can pay out up to 70% of your income in monthly instalments if you can’t work due to illness or injury, subject to conditions. This type of cover may help you and your family stay afloat financially if something happened that prevented you from working or only able to work in a reduced capacity.
You should be aware of a few key differences between income protection and life insurance when deciding on the right cover for you. For example, you may be able to claim a tax deduction on your income protection policy premiums, but this is not an option for life insurance policies. However, unlike a life insurance policy, you may have to pay tax on your income protection payouts as they are typically considered income and taxed as such.
We’ve prepared a guide that provides more information on the differences between life insurance and income protection. You might find that both of these insurances could benefit you. In that case, you could choose to take out both types of cover through a linked policy or two standalone policies.

Life insurance through super

There are two options available when you choose to take out life insurance. You can either get it from a specialist provider or through your superannuation fund. We explain both options’ pros and cons in our guide to life insurance through super.

Generally, getting life insurance through your super fund is a simpler process, with some funds providing automatic cover when you become a member of the fund and meet their eligibility requirements. In exchange, you may have a lower level of cover and less flexibility in your cover options. Keep in mind that the premiums for life insurance through your super fund are deducted from your super account, which could reduce your total retirement savings.

Income protection through super

You may also be able to take out income protection through your superannuation fund. However, your premiums will no longer be tax deductible if you do. Our guide provides more information about getting income protection through your super fund.

What affects your life insurance premiums?

Life insurance premiums can vary, depending on the type of cover, and the insurance provider. Similar to other kinds of insurance, your premiums are usually specific to your circumstances (e.g. age and health).

Some important factors to consider when calculating the average cost of life insurance are:

  • Type of cover: The more comprehensive your level of cover is, the more your premiums will cost.
  • Health and lifestyle: Your health and lifestyle are major contributing factors to the price of your premiums. People in poor health usually attract higher life insurance costs than those who are healthier. Other factors include smoking and alcohol consumption.
  • Occupation: If you work in an occupation where you’re faced with regular dangers and hazards like the operation of heavy machinery and drilling equipment, you may end up paying a higher premium.
  • Age: Your age may contribute to the cost of your premium due to the likelihood of needing to claim sooner than younger people.
  • Policy features: Extra cover, special conditions and optional features may add to the cost of your premium.
  • Sum insured or benefit amount: The amount of money your insurer will have to pay out once you claim will impact your premium’s price.

Life insurance exclusions to look out for

Similar to other insurance policies, it’s important to acknowledge and understand the exclusions and restrictions on your level of cover. Most insurers have general exclusions in place for every type of life insurance cover they offer. These default exclusions or restrictions form part of their policies regardless of your medical history, financial circumstances, health and wellbeing.

Some common general exclusions include:

  • Criminal activity/breaking the law: Injuries and death as a result of engaging in criminal or illegal activity can void your cover.
  • Suicide or self-harm: Many insurers have specific clauses in their policies that withhold paid benefits in claims involving suicide or attempted suicide within the first 13 months of taking out cover. Some insurers may offer reimbursements for any premiums instead of paying out the death benefit. Depending on your insurer and your policy’s terms and conditions, a death benefit may not be paid within this timeframe.
  • Negligent or reckless behaviour: Any injury or death caused by irresponsible, negligent or reckless behaviour may not be covered, with most insurers specifying these exclusions in their policy’s clauses. Examples include deliberate unsafe motor vehicle use, failure to acknowledge warnings, or not taking necessary safety precautions. Some insurers’ definitions of negligent or reckless behaviour may differ, but they are generally deemed as activities or incidents that any reasonable person would not undertake.

Although most insurers will cover applicants for pre-existing conditions, high-risk activities or jobs and occupational hazards, some insurers may have them listed as specific exclusions on their policies. You must read the fine print of your policy’s product disclosure statement (PDS) to ensure you’re fully aware of your exclusions and restrictions.

If you have a pre-existing medical condition, disclosing any information about your medical circumstances to your insurer is best . Some common pre-existing conditions may include asthma, depression, heart conditions, and cancer. It’s important to be honest when disclosing any pre-existing conditions you have with your insurer, as it may affect your ability to claim in the future.

Frequently asked questions

How does life insurance work for couples?

If you and your partner both want to take out life insurance, there are several options available to you. Depending on your circumstances, you may want either a joint life insurance policy or two separate single life insurance policies.

With a joint life insurance policy, two lives can be covered under one policy. Most joint policies operate on a first-death basis, meaning that the sum insured may only be paid out for the first death on the policy.

Your other option is to take out two separate single life insurance policies. With this option, you could get a payout if both people die. You may also have greater flexibility and customisation with this option, although it could also cost you more in premiums.

Do I still need a will if I have life insurance?

You might think you don’t need to worry about writing a will if you have a life insurance policy, but this isn’t the case. While a life insurance policy could provide your loved ones with financial protection when you pass away, there is more to a will than what happens with your money.

Your will also acts as an opportunity to decide how you want things like funeral instructions, how your valuables are divided, and even who will be the guardian of your children after your death.

For more information on writing your will, refer to our will preparation guide.

How much life insurance do I need?

The right level of cover for you will depend on factors like your current savings, debts and investments, your family’s average cost of living and the amount of superannuation you’ve accrued.

We can help you estimate an appropriate level of cover with our free life insurance calculator.

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