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Life Insurance

Financial struggles shouldn’t have to be one of your loved one’s concerns as they try to cope with the emotional burden of losing you. Life insurance ensures that they’re financially covered to deal with it all while also being able to pay for your mortgage, children’s future education costs, or anything else important and necessary throughout their adolescent life.

Megan Fraser

Fact Checked

Updated: 19 May 2024

Considering Life Insurance to Protect Your Family

Financial struggles shouldn’t have to be one of your loved one’s concerns as they try to cope with the emotional burden of losing you. Life insurance ensures that they’re financially covered to deal with it all while also being able to pay for your mortgage, children’s future education costs, or anything else important and necessary throughout their adolescent life.

Generally, there are many different ways to protect yourself and your loved ones throughout your life. But, you need to understand what sorts of events you want protection against before looking for the right type of cover, as it determines which types you’ll need. Typically, it’s a good idea to review your cover periodically to ensure that you have sufficient coverage in place for your specific requirements.

Advantages of having life insurance

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What is life insurance?

Typically, term life insurance pays out a lump sum benefit after your death or the diagnosis of a terminal illness. You’ll generally have the option for the benefit to be paid to your nominated beneficiary or your estate. Your beneficiaries can use this money to pay off debts, loans or financially provide for their requirements.

If you’d like to secure this type of financial protection for your family, you’re generally required to pay a premium to your insurer. Generally, you’ll have the option to choose stepped or level premiums as well as whether you’d prefer to pay monthly or annually. Several factors will generally influence the amount you’ll pay for your cover. These may include your age, gender, occupation, and other lifestyle factors like your smoking status.

Do you need life insurance?

Generally, it’s a good idea to consider life insurance if you have a spouse and children who depend on your income. Your term life policy may even be able to help you pay off a mortgage or help you care for your ageing parents, who are financially dependent on you. To determine whether or not you need life insurance you may want to consider your personal requirements.

How your life stage impacts your cover requirements

As you move through the various stages of your life, your coverage requirements typically change. As a young individual in your 30’s and 40’s, life insurance is typically at the forefront of your mind as you may have a mortgage that needs to be paid off and children who are still financially dependent on you. However, as you age, you may be wondering whether there is still value in maintaining some kind of seniors cover.

By understanding the value of life cover at the various stages of your life, you’ll be able to make an informed decision regarding your term life insurance policy:

What are the different types of cover?

Typically, a life insurance policy will pay out a lump sum benefit should anything happen to anyone listed on the policy documents. This can help them financially in case they are sick, disabled or diagnosed with a critical illness. However, it’s important to note that different types of policies are available that offer various features and benefits.

Are there any alternatives?

If you’re not sure whether term life cover is right for you and your family, you generally have a few additional options available to you. You could provide for your family by putting away funds for your loved ones in a savings account. Alternatively, you could have your liabilities covered by your investments by selling any assets you have, or you could use funds from the ongoing income you may have in the form of properties or shares.

Although saving money for your loved ones after your death is typically a good idea, saving enough money to replace your income is often a lengthy process. Most families need financial protection sooner as you may have a mortgage to pay off or other liabilities. In these circumstances, a life insurance policy is generally a good idea as it generally provides your beneficiary with a certain level

Pros and cons of term life cover

Advantages
Disadvantages
Your beneficiaries typically receive a lump sum benefit when you pass away.
If you have specific high-risk habits, for instance, being a smoker, your premiums are generally higher.
Generally, you have the option to choose between stepped or level premiums.
Generally, there are certain exclusions on your policy which you may want to familiarise yourself with. E.g. 13 month exclusions for suicide. However, it’s essential to refer to your PDS for your policy’s specific terms and conditions.
If your policy is personally held, then the benefits your loved ones receive is typically tax-free.
Your medical history may impact your premiums. If you have any pre-existing conditions, you may want to consider a pre-assessment before applying for cover.
You may qualify for a terminal illness benefit, which pays your full death benefit in advance if you are diagnosed with a critical condition, and a medical professional declares that you have a life expectancy of less than 12 to 24 months.
You’ll only be covered up to a certain age. Generally, you’ll be covered up to 99 years, but this varies amongst insurers.
Your level of cover typically increases by 3-5%. This generally depends on your insurer, or the CPI, whichever is greater to help keep your policy in line with inflation.
X
You may be able to link your life insurance with other types of policies like trauma insurance or TPD.
X

Factors that influence the amount of cover you need

Before applying for a new life insurance policy in Australia, considering your current lifestyle is typically a good idea. Generally, these factors will determine how much coverage you’ll need to help the ones you love most maintain their current lifestyle.

Some of the factors that you’ll need to take into account include:

How much does life insurance cost in Australia?

Generally, the average cost of life insurance in Australia depends on several factors. This typically includes your age, gender, smoking status, medical history and the sum insured you’re applying for. Depending on the policy and insurer, you can generally start from $29.75 for stepped monthly premiums for a $1,000,000 worth of cover as a 35-year-old male living in NSW. 

Average stepped monthly life insurance premiums

Sum Insured
$200,000
$500,000
$1,000,000
$1,500,000
25-year-old male
$12.53*
$12.53
$41.85
$58.38
25-year-old female
$7.91
$16.80*
$25.16
$37.74
35-year-old male
$8.95*
$19.02*
$29.75
$44.63
35-year-old female
$7.01*
$14.90*
$24.54
$30.57
45-year-old male
$14.17*
$30.11
$49.60
$72.31
45-year -old female
$11.49*
$24.41
$40.20
$60.30
55-year-old male
$51.02
$103.65
$171.34
$253.01
55-year-old female
$38.19
$74.04
$120.77
$177.16
65-year -old male
$225.01
$462.93
$788.88
$1,179.32
65-year-old female
$146.13
$295.31
$505.95
$754.92

Source: Life Insurance Direct Comparison Engine (November 2021, premium estimates for non-smoking individuals living in NSW on stepped monthly premiums) *Premiums do not meet most insurers lowest premium requirements.

Average level monthly life insurance premiums

Sum Insured
$200,000
$500,000
$1,000,000
$1,500,000
25-year-old male
$20.88*
$27.20
$44.05
$66.89
25-year-old female
$16.17*
$20.40
$28.97
$44.26
35-year-old male
$20.95*
$26.84
$43.45
$65.98
35-year-old female
$20.21*
$20.67
$32.91
$50.18
45-year-old male
$34.46
$61.10
$95.98
$134.22
45-year -old female
$27.44
$46.70
$75.93
$134.22
55-year-old male
$107.41
$195.47
$326.90
$480.59
55-year-old female
$70.41
$130.50
$214.04
$311.30
65-year -old male
N/A
N/A
N/A
N/A
65-year-old female
N/A
N/A
N/A
N/A

Life Insurance Direct Comparison Engine (December 2023; Premium estimates for $200,000 of death cover for a 55-year-old non-smoking male and female who works as a school teacher and lives in NSW)

Features and benefits to consider when you compare life insurance

Usually, life policies have several features and built-in benefits, which generally vary depending on the type of policy and your insurer. Examining and comparing the benefits of a policy could help you decide which type of policy suits your requirements. This information is typically available in the Product Disclosure Statement (PDS) from specific insurers.

Built-in benefits

When you apply for a new policy, you generally want to examine the benefits included with the policy. Certain benefits are generally standard but may not be available from all insurers. In some cases, your insurer may build a specific benefit into your policy, while other insurers might offer it as a paid option.

Examples of built-in benefits include:

Unique benefits

Typically, these differ between insurers. However, there are several unique built-in benefits that you can find on a life insurance policy. Examples of unique benefits include child cover, accidental injury benefits and life cover conversion benefits.

Premiums

Insurers generally calculate your policy premiums by adding your base premiums and policy fees together. It’s important to note that stamp duties may also be included in your premium calculations, depending on the policy type, for instance, income protection. Generally, you’ll be able to find the cheapest life cover by looking for policies that offer discounts for annual premiums, combining policy types or taking part in your insurer’s health rewards programs.

Premium types

Expiry ages

Term life policies often have various expiry ages, which generally differ depending on who is insuring you. However, it’s most likely that you’ll find a policy that expires when you turn 100 years old. To learn when your policy expires, it’s generally best to check the relevant PDS or with your insurer.

Exclusions

Typically, your cover is subject to certain exclusions. A standard exclusion is an event, condition, or circumstance that your insurer won’t cover. For example, several insurers won’t pay any benefits for suicide in the first 13 months after you’ve purchased your policy. To learn what you won’t be able to claim for, it’s typically a good idea to read your policy disclosure statement (PDS).

Policy terms and conditions

It’s generally a good idea to read through the terms and conditions of your policy, including what you are covered for or not. For example, suppose you attempt to avoid specific exclusions by failing to inform the insurer of your medical conditions or lifestyle. In that case, the insurer might be within their rights to decline a future claim or void your policy.

 

Frequently Asked Questions and Answers

Generally, the best life cover for you is a policy that suits your unique requirements. For this reason, it may be a good idea to compare policies and find the best option for you and your family. Each insurer will typically assess your circumstances according to their own set of criteria and may offer different benefits and discounts.

Whether cover is a good idea for you generally depends on your circumstances and requirements. When you get older, your circumstances tend to change, which generally means that your insurance requirements will also change. If you’re still paying off your mortgage, have children in your home or have any outstanding liabilities, life cover may be worth it for you and your family.

This typically depends on whether your policy is personally held or owned by your super. If you pay your life insurance premiums, your premiums typically won’t be tax-deductible. However, if your policy is owned by your super fund and insures you as a member of the fund, your premiums will usually be deductible to the fund.

Yes, generally, you’re allowed to have more than one life policy. However, your policies will typically need to be justified. You’ll typically need to disclose any existing cover you already have in place to the new insurer before you apply for any extra policies.

Typically your death benefit on your life insurance policy is the payout your beneficiaries receive after you pass away. When you apply for cover, it’s generally a lump sum paid to specific individuals you nominate in your policy documents.

Yes, if you’re a smoker, you’ll typically still be able to apply for the same life cover as non-smokers. However, you’re more likely to pay higher premiums than non-smokers. If you can prove that you’ve stopped smoking for at least 12 months, you may be able to review your policy and the premiums you pay.

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Specialist

Megan has extensive experience writing about health and life insurance in Australia. Megan has a special interest in health and wellness. She relies on her background in counselling psychology to convey the latest findings in a manner that is most beneficial to ComparingExperts readers. In every article she writes, Megan aims to uphold the standards of the Private Health Insurance Intermediaries Association (PHIAA) which ComparingExpert is part of.

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