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What is Life Insurance?

Life insurance, also known as death cover, is a way of providing financial protection to your loved ones in case you pass away. If you die during the coverage period, a lump sum benefit gets paid to your nominated beneficiaries. This money can be used to pay off any outstanding debts, your mortgage, funeral costs, or to leave a legacy for your family members.

Life insurance in Australia is as a contract between you (the policyholder) and the life insurance provider (the insurer). Life insurance premiums are paid either annually or monthly in exchange for protection. If you stop paying your premiums, you are no longer protected.

Depending on your circumstances, you may or may not need life insurance.

Is life insurance worth it?

A death benefit is worth it if you can afford the premiums and want your family to be financially protected should you pass away. A life insurance policy is typically purchased for the benefit of others. Term life insurance can be used to replace lost potential income during your working years, which will be especially important when you still have young children.

However, everyone’s situation is different. For example, a single person with no children won’t normally need life cover because no one is relying on their income.

Life insurance will be useful to you if you need help:

  • Supporting your family’s current lifestyle should you die suddenly.
  • Paying for burial expenses and funeral service.
  • Replacing lost income due to sickness or injury.
  • Provide for your child’s care and education.
  • Paying outstanding debts, loans and mortgage payments.
  • Creating an inheritance.

Generally, your need for cover will change as your family grows, your kids become financially independent, and as other assets, like superannuation, become more sizeable. Sooner or later you will need insurance of some sort.

From Quote to Application We Guide You Through The Process

What does life insurance cover me for?

Life insurance usually covers you for death or when diagnosed with a terminal illness. Depending on the type of life cover you choose, you can also be protected against critical illnesses, like malignant cancers or heart attack, this is usually called trauma cover. However, if you’re unable to work, you’ll need TPD insurance or Income Protection Insurance depending on the nature of your claim.  

The different types of life insurance in Australia

The kind of life insurance available in Australia is Term Life Insurance, which is offered for a set period, usually until you reach age 99.

Many insurers place different types of cover under the life insurance umbrella, including:

  • Total and Permanent Disability (TPD) insurance: Pays a lump sum benefit if you become totally and permanently unable to work.
  • Trauma Insurance: Provides a lump sum payment should you suffer from a critical illness as specified by your insurer.
  • Income Protection Insurance: You receive a monthly benefit if you are unable to work for a specific period due to illness or injury.

You should choose a suitable policy based on your unique requirements and what you can afford.

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How much life insurance do I need?

The amount of life coverage you need will depend on various factors. For example, whether you have financially dependent children, a mortgage or personal debts that need paying, and the amount of income your family will need when you' are no longer there to provide for them.

As a rule of thumb, you should consider a minimum amount equal to ten times your annual salary. However, this amount should be determined by your specific needs and unique circumstances.

Thinking about your situation thoroughly before you decide to compare policies will give you a good idea of how much cover you may need.

You should also understand the difference between purchasing direct vs retail, as this will have a significant impact on your premiums.

Direct Life Insurance

  • Generally available without the need for medical examinations and can be purchased via telephone or online from the insurers themselves. These policies are usually more expensive and limit the maximum amount of cover you can get.

Retail Life Insurance

  • Fully underwritten and purchased through a broker or comparison website. Advised policies typically ask many questions during application and as a result will usually offer cheaper premiums, while also allowing you to choose your cover amount.

How to compare life insurance quotes

The three main reasons people usually want to compare life insurance is to:

  • Find more affordable cover,
  • Obtain more comprehensive protection, or
  • Purchase life insurance for the first time.

Get a life insurance quote without having to provide personal information

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Select your level of cover, age, gender and state. We'll provide you with the most affordable quotes from Australia's top life insurance companies.

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Compare life insurance quotes online in less than 60 seconds. A side-by-side comparison to help you find the right policy for your unique requirements.

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When you feel confident in choosing a life insurance policy book an application and a specialist will take you through the purchasing process.

What is the average cost of a life insurance policy in Australia?

Cover Amount Gender Average Monthly Premium
$200,000 worth of cover Male $12.38
Female $9.53
$500,000 worth of cover Male $23.13
Female $17.66
$750,000 worth of cover Male $32.51
Female $24.76
$1,000,000 worth of cover Male $39.54
Female $30.28

The above average cost of life insurance was calculated on retail life insurance policies using lifeinsurancedirect.com.au’s free online comparison tool. Calculations were based on a non-smoking 35-year-old individual living in NSW.

How are life insurance premiums calculated?

The cost of your premium will depend on the cover amount you choose, the life insurance company you’ve selected and some individual factors. Insurers will generally base standard premiums on:

  • Age
  • Smoking Status
  • Gender, and
  • The State you live in

In assessing your rates, an insurer may also ask for a medical examination. This assessment is done at the expense of the insurer.

Are my life insurance premiums tax deductible?

Life insurance, TPD and Trauma premiums are generally not tax deductible for personal insurance. Income protection premiums, on the other hand, are usually tax deductible. If you purchased life insurance through your superannuation, premiums are generally deductible to your super fund, which they can then pass on to you.

Apart from comparing premiums, you should consider other policy options like:

  • Premium type. Stepped, level or hybrid premium structure.
  • Built-in benefits such as free child cover.
  • Premium freeze option and suspending cover benefit.
  • Any exclusions or situations where the insurer will not pay
  • Optional paid features like an additional amount being paid if death was due to an accident.

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Reviewing your current life insurance policy

If you already have a policy and believe that your premiums are too costly or perhaps does not offer the range of coverage you need at this stage of your life, then perhaps it's time to see what else is out there.

It's easy to forget that your insurance needs change as your life does. Every time you increase the size of your mortgage, or your family becomes larger; your financial commitments increase with it. Likewise, as your career or income changes, your term life insurance should reflect your changing lifestyle.

However, do not cancel your existing life cover until you have your new policy in place. The last thing you want is to be an accident and unprotected while thinking about alternative policies.

Life insurance products can also change. You may find there are new solutions that better suit your life today. Are you aware of existing features within your policy?

Many life insurance companies make product updates each year, so make sure you have the latest copy of your policy's relevant product disclosure statement (PDS). The PDS outlines the benefits and clauses of your policy. If you are unsure if your PDS is the latest copy, contact an insurance specialist or the life insurance company.

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When is life insurance paid out?

Generally, your life insurance policy will pay out when you have died, and your beneficiary(s) has filed a death claim with your insurance company. After submitting a valid death certificate, the completed claim forms and any additional documentation the insurer requires, your lump sum benefit will be paid to your nominated beneficiaries.

How long it will take depends on the type of claim you’re making and the complexities involved, for example, if death was due to an accident. Generally, it will take up to 5 working days for your claim forms to be assessed.

How to claim life insurance benefits

  • Step 1

    Find the latest copy of your life insurance policy

  • Step 2

    Notify your insurer via telephone or in writing

  • Step 3

    Obtain a certified death certificate

  • Step 4

    Complete and submit the claim forms and other requested documentation

  • Step 5

    Benefits will be payable to your nominated beneficiary(s)

Step 3 of claiming life insurance will differ depending on your policy type. For example, when claiming for Trauma insurance, you will likely need to obtain a medical certificate providing information regarding your diagnosis of critical illness.

Be aware, that when calling your life insurance company that your calls are recorded and the information you provide might have an impact on the claim getting approved. ComparingExpert offers full claims services to all our clients.

Your frequently asked questions answered

Why is life insurance important?

Life insurance is essential if you have loved ones that are dependent on your financial support, whether this is your spouse, children or elderly parents. You need to provide them with enough money to help them maintain their current lifestyle, like keeping up with the car and house payments or hiring someone to do the day-to-day household tasks.

The top 10 advantages of having life insurance:

  1. A tax-free death benefit to your financially dependent beneficiary(s).
  2. Eliminating worries about providing for your family should you die.
  3. Your family won’t have to deal with debt.
  4. Term life insurance provides cheaper premiums.
  5. Buying insurance when your younger is more affordable.
  6. Flexibility and choice of insurer, cover amount, premium type etc.
  7. Knowing your funeral will be paid for.
  8. Providing for your children’s future education.
  9. Leaving a legacy in the form of an inheritance.
  10. Giving to charity.

What is the right age to get life insurance?

While the general entry age for life insurance in Australia is 19, most people under the age of 25 are more concerned with paying the bills, especially when single and without children. From a financial standpoint, this makes sense. However, as soon as you are working and financially independent, you should at least think about getting income protection insurance and perhaps critical illness cover.

Can I change my cover amount?

Yes, you can usually decrease your death benefit amount at any time; this might be necessary if premiums become too expensive or you no longer have financial dependants. Many life insurance policies are guaranteed renewable, meaning you can generally increase your insurance coverage without having to provide additional medical information after a specific life event; when you take out a mortgage, get married or have a baby. The premiums you pay will reflect your cover amount changes.

Depending on how you purchased your cover, you can either contact the life insurance company or your broker and request a decrease or increase in life insurance coverage.

Is life cover in my super enough?

Because life insurance inside super is usually purchased in bulk, the type and level of cover you have might not provide sufficient protection for your unique requirements. Start by reviewing the coverage you have inside super and ask a broker to help you determine whether it’s enough. Because life cover through superannuation might be limited, many Australians choose to take out additional cover.

Is it legal to have multiple life insurance policies?

Yes, you can have multiple life insurance policies if you are not over-insured. Meaning, the amount of cover you purchase must be justified, you can’t be better off disabled or sick than if you were healthy and able to work. Many brokers advise customers to take out more than one life insurance policy, especially when only having cover through super.

Your beneficiaries can rightfully claim from all the policies you hold, as long as you have complied with your duty of disclosure and the different insurance companies are aware that you have multiple coverages from different providers.

Is it wise to pay life insurance via your superannuation?

Many Australians have life insurance through their super fund, however, what you might not know is that by paying premiums from your fund you are potentially reducing your retirement savings. Whether it is a good or bad idea to pay for your life insurance via your super fund depends on your specific circumstances.

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