Explore Life Insurance

One of the more serious conversations every Australian will need to approach is talking about what happens to our families when we pass away. This topic can be extremely confronting because:

  1. we have to face our own mortality, and
  2. we have to make peace with the fact that we’re not always going to be there for our loved ones.

This is where life insurance enters the conversation.

What is the purpose of life insurance?

Typically, life insurance is an agreement that if you die, or are diagnosed with a terminal illness, a sum of money will be paid out to (typically) your spouse or children. You can also have this death benefit paid to other members in your family (i.e. parents, siblings, etc).

At a terrible moment in time, life insurance can help you take care of the financial uncertainties your family will likely endure after you’re gone. Financial obligations such as mortgage repayments, everyday living expenses, funeral costs, children’s education fees, and debts should all be taken into consideration when discussing a suitable life insurance policy.

In 2016, more than 158,000 deaths were recorded in Australia, with coronary heart disease being the leading cause of death. These grim figures highlight our own mortality, and place emphasis on life insurance’s role if the worst were to happen.

Life insurance provides your dependants with the peace of mind to start future-proofing their lives should the unthinkable take place.

concept housing a young family. Mother father and child in new house with a roof

What are your options with life insurance?

Generally, there are four different types of cover under the banner of life insurance. These options depend entirely on your circumstances and needs. Like most insurance policies, choosing a higher level of cover will cost you more, but usually offers a broader level of financial protection.

The main types of life insurance cover are:

Term life insurance

Otherwise known as ‘death cover’, this level pays a set lump sum when you die. The sum of money goes to the people nominated as your beneficiaries on your policy.

Total and permanent disability cover (TPD)

This level of cover assists you by paying a lump sum in the case of serious injury, or permanent disablement. This sum is designed to support you with rehabilitation and living costs if you can no longer return to work. TPD insurance differs from insurer to insurer, and can be taken out in conjunction with a life insurance policy, or as an individual product.

Trauma cover

Offers cover if you’re diagnosed with a terminal illness or injury, such as cancer, heart disease, stroke, and other life-threatening conditions. Also known as ‘critical illness cover’, trauma insurance pays a lump sum if you suffer a major medical incident (such as cancer and heart disease), and is ideal for Aussies who want to safeguard their health.

Income protection

There are usually three types of income protection – standard income protection, mortgage protection insurance, and redundancy cover. These levels of cover safeguard your flow of income in the event of being unable to work due to illness or injury.

  • Income protection commonly replaces up to 70% of your monthly income for a set period of time (although you can insure yourself for less).
  • Mortgage protection insurance is a product available for Aussies who want to protect their borrower from the risk of default (for both commercial and residential properties).
  • Redundancy cover is designed to provide you with up to 70% of your wage for a set period of time in the event you are ill or injured, or if you become unexpectedly unemployed.

What is the average price of life insurance?

Depending on your type of cover, and the insurance provider, the average price of a life insurance premium varies. Similar to other kinds of insurance, your premiums are usually specific to your circumstances (i.e. age and health).

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

  • Type of cover: The more comprehensive level of cover, the more your premiums will cost.
  • Health and lifestyle: Your health and lifestyle are major contributing factors in the pricing of your premium. People in poor health usually attract higher life insurance costs than somebody in better health. Other factors include smoking, alcohol consumption, regular exercise, sports, and diet.
  • Occupation: Dangers and hazards you’re faced with in your line of work can affect the cost of your premium. High risk activities such as operation of heavy machinery, and drilling equipment can impact costing of life insurance.
  • Age: Your age may determine part of your premium’s price. Older Australians may experience higher prices due to their stage in life, and the likelihood of them needing to claim sooner than younger Aussies.
  • 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 die will impact your premium’s price.

Life insurance exclusions to look out for

Similar to other insurance policies, it’s very important to acknowledge and understand exclusions and restrictions on your level of cover. General exclusions are usually what insurers have in place for every type of life insurance cover. Many insurers employ default exclusions or restrictions which are cemented into their policies regardless of your medical history, financial circumstances, health, and wellbeing.

Some common general exclusions are:

  • Criminal activity/breaking the law: Injuries and death as a result of engaging in criminal or illegal activity will 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 from taking out cover. Some insurers may offer reimbursements of paid policies instead of paying out the death benefit. Depending on your insurer and your policy’s fine print, no death benefit will be paid out within this timeframe, and the conditions may be reassessed after the initial 13 months have passed.
  • Negligent or reckless behaviour: Any injury or death caused by irresponsible, negligent, or reckless behaviour will not be covered, with most insurers specifying these exclusions in their policy’s clauses. Examples include deliberate unsafe use of a motor vehicle, failure to acknowledge warnings, and take necessary safety precautions. Some insurer’s definitions of negligent or reckless behaviour may differ, but 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. It’s imperative that you read the fine print of your policy’s product disclosure statement (PDS) to ensure you’re fully aware of your level of cover’s exclusions and restrictions.

If you have a pre-existing condition it is always best to disclose any information about your medical circumstances to your insurer. Some common pre-existing conditions may include asthma, depression, heart conditions, high cholesterol, and cancer. It’s important to be honest when disclosing any pre-existing conditions you have with your insurer, as it may disrupt or reject your policy during the claiming process.

Important questions about life insurance in Australia

Taking out a suitable policy is a big decision, so we’ve put together some helpful information to simplify life insurance.

Do you need life insurance?

It’s a fair question, because your life insurance can cost a lot of money over the years in premiums. With this in mind, we’ve assembled some thought-provoking reasons why you should get life insurance.

Will your health affect your life insurance?

Cheaper life insurance is just one more reason (in a long list) to keep yourself healthy as you age. We explain how your life insurance is calculated, which will demonstrate exactly why your health impacts your premium.

How much life insurance do you need?

If you crunch the numbers, you’ll see that it does work out to be reasonably cost effective to be insured. But, just how much cover can you get from your monthly premium?

Do you already have life insurance through your superannuation?

Many Australians (roughly 70%) have life insurance cover through their superannuation fund. However, the level of cover in your superannuation may not be enough to cover the costs of your family’s needs.

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