Life Insurance Guide

Understand your life insurance options and how different cover types can help you.

Download Life Insurance Guide

Protecting your financial independence

Being financially independent is all about having the freedom to do the things you want to.

Unfortunately, a serious illness or accident can often take financial independence away and many Australians don’t have the right type of life insurance to help, putting themselves and their families at risk. This comprehensive guide can help you understand what types of life insurance covers there are, how they can help you, and how you can compare policies.

In particular, it outlines 4 steps you need to follow to get the cover you need – so you can be confident you’re getting the right cover for you.


Chapter 1: Do I need Life Insurance?

Life insurance companies pay out almost $10 million every working day in claims, providing financial relief that’s helping thousands of Australian families get by after an unexpected illness or accident. This figure would be even higher if Australians had adequate levels of cover.*

To determine whether you need life insurance, simply ask yourself:

‘Can I or the people dependent on me financially survive if I were to become seriously ill or injured or pass away?’

For most Australians, the answer would be ‘no’. When you are in your 20s and early 30s, your life priorities and choices are likely to be very different from those who are well settled into their middle age years! Life-changing events come in many shapes and forms – from marriage and new babies to unexpected illness, accident and serious illness.

Different types of Life insurance can help provide financial coverage and security in the event of death, severe illness or injury.

Whether you have dependants or not, Life insurance can help make sure your loved ones don’t struggle to cover any debts you might leave behind if something unexpected were to happen and provide financial security for the longer term.

Even if you have some life insurance already, you should review your insurance needs at least annually to take account of any change in your circumstances.



Chapter 2: When should I take out life insurance?

Life changes all the time – sometimes quickly, sometimes more gradually. The life events below can trigger the need for life insurance by taking out a new policy or upgrading your existing cover.


When you marry, you take on shared financial obligations. Newly married couples should think about taking out adequate Life insurance as well as your wills and superannuation in order.

Would your new partner be able to afford the mortgage repayments on their single income if you died? Life insurance is a great way to ensure peace of mind as you plan for the future.

Starting a family

When you start or grow your family, you should ensure you have adequate Life insurance. You may have Life insurance in your super, but is it enough to cover the additional cost of bringing up a family if you’re not there?

You should also consider cover for the non-working partner to help manage any financial burden if you were unable to work.

Buying a house

When buying a house, accessing your first home loan or increasing your mortgage, you can’t afford to leave yourself unprotected.

Who will pay the mortgage if something happens to you or your spouse/partner? Can your family cover funeral expenses as well as making up for the sudden loss of income?

Your own illness or injury

Your own illness or incapacitating injury can also trigger the need for cover. No one wants to think about the possibility of a serious illness or dying but it can happen.

A lump sum payment or replacement income can be used to cover the cost of your mortgage, children’s education and more.

Illness to someone close

When illness strikes a dear friend or loved one, it’s both a shock and a time to reassess your own financial protection.

Common chronic diseases such as diabetes and heart disease can create a high burden for families and carers.

Starting your own business

If you own your own business, the consequences of being unable to work due to severe injury or illness can be financially devastating.

You also need to find a way to keep your business solvent, particularly when you can’t physically work.


Chapter 3: What types of covers are available?

Life Cover

Life cover (also known as term life insurance or death cover) pays a set amount of money as a lump sum when the insured person dies. The money will go to the people nominated as beneficiaries on your policy, such as family members, usually to help pay off debts and pay for ongoing family living expenses. Life cover is the simplest and most common form of life insurance.

Key features of Life Cover:

  • The insurer offering a life cover policy will usually ask some medical, occupation and pastime questions, and may require a medical examination when you apply for cover.
  • Your policy is renewed annually, with premiums usually increasing as you age (commonly known as ‘stepped premiums’) and as your level of cover increases (commonly known as indexation’), to keep up with inflation.
  • Usually only a death certificate and claim form is required to initiate a claim. The insurer may then seek additional information from the medical providers you have consulted prior to death.
  • Most term life cover will pay out a lump sum of money if you are diagnosed with a terminal illness and given 12 months to live. If the payout is made and you recover, the money doesn’t have to be returned.


Income Protection

Income protection pays an ongoing income if you can’t work due to a serious illness or injury. The money will be paid to you to help pay bills and keep up with your mortgage or rent as well as other living costs. This type of insurance is needed more often than you might think. Some estimates are that you are up to 10 times more likely to become disabled than to die during the life of an insurance policy.

Key features of Income Protection:

  • Most policies will pay you up to 75% of your before-tax income, either for a set period or until you reach the age of 65, depending on the type of policy you choose.
  • Different policies can include different benefits and features. You will need to decide between having a policy with more features and benefits with a higher premium, or taking a more basic policy with less features and benefits for a lower premium.
  • Income protection normally isn’t cheap, but the premiums are generally tax-deductible and should be claimed when you file your tax return. Any income benefits received then become tax assessable, just like your usual salary or income.
  • Income protection within your super has to meet certain conditions and usually only pays a monthly benefit for up to 2 years. However, this may not be enough if you are unable to work again.


Total and Permanent Disability (TPD) Cover

TPD cover provides a lump sum of money for sickness or injuries causing a permanent disability that stops you from working again. This is a popular type of cover, as many people want to be financially independent if they are permanently disabled, which often brings with it many additional costs for care and rehabilitation.

Key features of TPD Cover:

  • TPD cover is almost always purchased as an optional extra when you take out life cover.
  • Your level of cover is usually limited to an amount less than or equal to the life cover you have purchased.
  • You can use the money to cover any costs such as re-fitting your home, a permanent carer or paying off debts.
  • The extent of the disability required for you to make a claim may vary depending on your occupation and the type of policy you choose.
  • Typical TPD claims may potentially be made in relation to motor vehicle, workplace and sporting accidents; serious illnesses impacting the brain, central nervous system or individuals mobility; and/or mental illness.


Trauma Cover

Trauma cover, also referred to as critical illness cover, serious illness or recovery insurance, provides a lump sum of money if you suffer a medical condition or trauma that impacts on your
life or lifestyle – such as being diagnosed with cancer or suffering a stroke or heart attack. These days, many people are fortunate enough to recover from such traumas and in time, continue on with their day-to-day lives.

If you are servicing large debts like a mortgage, or if you or your spouse/partner need some time off work, this type of cover may be important in helping maintain your lifestyle. Even if you have private health insurance, trauma insurance can help you cover the additional costs of out-of-pocket medical expenses, replace lost income and allow you to reduce your working hours while you recover.

Key features of Trauma Cover:

  • Cover is often purchased as an optional extra when you take out life cover.
  • Trauma cover pays a lump sum if you’re diagnosed with a specific critical illness that’s covered by your policy, whether that illness is able to be successfully treated or not.
  • You can spend this money on whatever you like – medical bills, your mortgage, even an overseas trip.
  • Your level of cover is usually limited to an amount less than or equal to the life cover you have purchased.
  • You don’t have to be unable to work to receive a trauma benefit.
  • Trauma claims are usually made for conditions such as Cancer, Heart attack, Coronary artery disease and bypass surgery and Stroke.


Get the complete guide

Download our Life Insurance Guide today and discover a smarter way to calculate exactly how much cover you need.

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