How to Choose the Best Life Insurance* Policy

Looking for the best life insurance* policy? Tips to compare policies and find top rated cover.

Term life insurance will provide a lump sum benefit in the event of your death so that those you love can close off any existing debts and cover any ongoing expenses into the future. Finding the right policy for your situation is not simply a matter of getting a few quotes and going with the cheapest option you find. There are a number of important factors to consider when comparing policies to ensure you find an option that provides adequate cover for your situation.

This article will provide an overview of what to look out for when looking at policies and explain what some of the different features are. If you are ready to receive quotes for cover.

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Coverage is the amount of money that you will be paid in the event of a claim. An insurance consultant can help you determine an appropriate amount. Calculator
Provides a lump sum payment if you become totally and permanently disabled and are unable to return to work.
Provides a lump sum payment if you suffer a serious medical condition. Cover can be taken out for 40-60 medical conditions depending on the policy you choose.
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Compare Life insurance quotes from these direct brands

Rates last updated April 26th, 2017
Product details Maximum cover Maximum Entry Age Cooling-off
Life Insurance
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Choice of cover options and flexible premiums to suit budget. No lock-in contracts and fast application. $1,500,000 65 30 Get quoteMore info
Insuranceline Life Insurance
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Get up to $1.5 million in life cover with no medical tests required. $1,500,000 69 30 Get quoteMore info
Real Family Life Insurance
Real Family Life Insurance
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ . $1,000,000 64 30 Get quoteMore info
Term Life Insurance
Term Life Insurance
A simple life insurance product that can offer up to $1,500,000 in a lump sum payment on death or diagnosis of terminal illness. $1,500,000 69 30 Get quoteMore info
Life Insurance
Life Insurance
Get flexible life insurance up to the sum of $2,000,000. $2,000,000 59 21 Get quoteMore info
NobleOak Term Life Insurance
NobleOak Term Life Insurance
Save 20% on NobleOak life insurance and pay no premium in the first month. $15,000,000 69 30 Get quoteMore info
Woolworths Life Insurance
Woolworths Life Insurance
Receive a discount of 10% on life insurance as a Woolworths Rewards Member. T's and C's apply. $1,500,000 65 30 Get quoteMore info

What are my life insurance options?

Life insurance is a cost-effective way to secure your family’s future if you die with debts, a mortgage or other financial responsibilities such as the cost of your children’s education. Meanwhile, your chosen extras offer expanded cover against other similarly devastating situations like critical illnesses or permanent disability.

Life insurance policies will always include a death benefit (life cover), which will pay a lump sum benefit in the event that you die. However, you'll also need to decide which of the following extras you would also like to include. Depending on your circumstances, your life insurance policy can consist of one or more of the following:

  • Life cover: Your policy will pay out in the event of death or the diagnosis of a terminal illness
  • Total and permanent disablement (TPD) cover: If you suffer total and permanent disability your policy will pay out to cover home modifications, the expense of ongoing assistance, income cover and anything else you spend it on
  • Trauma cover: Your life insurance policy will pay benefits if you suffer a defined health event listed in the policy, such as heart attack or stroke
  • Income protection cover: A usually optional extra that can be bundled with life insurance to pay out a portion of your regular income (typically 70-80%) in the event of a sickness or injury that temporarily prevents you from being able to work
  • Child cover: Usually like trauma cover for your children. If your child suffers a defined event as named in the PDS your policy will pay out

You will encounter these options, and potentially others, while comparing life insurance policies. Decide which ones you need, and beware of overlap with your other insurance. If you already have good income protection insurance, for example, you should not include it in life insurance as you cannot typically claim multiple times for the same event, even if you so against different insurance policies.

Check out a quick guide to the different types of life insurance

How much cover do I need?

When taking out a life insurance policy you will need to consider your sum insured. This is the total amount you are covered for and the maximum that will be paid out in the event of your death. The trauma and TPD components of your policy may have their own separate benefit limits or they might share the sum insured with the term life insurance part of the policy.

Some insurers automatically set your sum insured based on your usual income, while others let you choose your own. Either way a higher sum insured means higher premiums, so the best life insurance policy* will be neither too little nor too much.

For a rough idea of how much your sum insured should be

  • Multiply your annual salary by ten. This amount should be reasonable if you are the sole income-earner in your household.
  • Use a life insurance calculator. This makes it easy to add up different expenses to arrive at an adequate sum to be insured for.

For a personalised recommendation

For a clearer idea of the amount you should insure yourself for, you may wish to get in touch with an insurance consultant. They can help you work out the numbers, as well as help you decide which additions are right for your needs and which insurers have suitable policies.

Steps to getting the best cover you your personal circumstances

Shopping for insurance online allows you to use a life insurance calculator to determine what kind of coverage is right for you, depending on your financial situation.

1. Know what you’re looking for

Decide ahead of time whether or not you need trauma, TPD or income protection insurance, whether you also want bundled cover for partners or children and what kind of sum insured is suitable. Knowing this lets you narrow the field and lets you compare suitable equivalent policies side by side.

2. Consider your risk level

Insurers often set your premiums according to your risk levels. They will ask some questions to determine whether they or not to insure you and how much your policy will cost. Expect questions like:

  • Are you a smoker?
  • What is your medical history?
  • Do you have any pre-existing conditions?
  • What is your age?
  • What is your gender?
  • What kind of work do you do

3. Know whether you will be covered if you leave Australia

If you move abroad, some policies will not cover you, especially if you move to what the insurance company considers a high-risk country.

  • Quality life insurance policies should cover travel and migration to safe countries.
  • If you are planning to migrate in the future, you should see how your policy handles it. International rather than Australian-only insurers may be more accommodating.

4. Compare a lot of quotes

Get quotes for an idea of what the usual price range is for a certain type of policy, and how much trauma, TPD or income protection insurance costs if included. Getting quotes online makes it easier to quickly see the benefits of and compare many equivalent policies side by side.

5. Check the terms and conditions closely

Many insurers reserve the right to refuse benefits after a certain time frame, which can be devastating if families are too overwhelmed to promptly make a life insurance claim. How big this window of opportunity is can vary between insurers. This is just one of the terms and conditions to look for, along with limitations, exclusions and more. You should consider these when comparing policies and make sure your beneficiaries know about them too.

6. Choose a quality insurer

Be aware of differences in quality when comparing insurers. Check reviews and ask people you know who have had dealt with the company before about their experiences. In particular you should look at feedback surrounding their claims process, helpfulness and promptness. Life insurance and all its variants pay benefits when people are at their most vulnerable, so a good claims process is highly desirable and may be worth paying a bit extra for.

What should I actually be looking at when I compare policies?

When comparing and selecting life insurance policies it is good to look for specific terms which affect your cover. Read through the policy to find:

These are the specific events and situations that are covered by your life insurance policy. Depending on your policy, the inclusions may included:

  • Death or diagnosis of a terminal illness. This is the main condition under which life insurance will pay out.
  • Heart attack, cancer and other specifically named severe health issues. These scenarios are covered by trauma insurance.
  • Permanent disability. If you have TPD insurance and an insured event leaves you permanently unable to work and needing ongoing care, then you will be covered. Find out exactly how your policy defines disability to see how relevant this option is for you.

Exclusions will vary between policies, but some of the more common things you will find include:

  • If the insured event which resulted in a claimable injury was the result of consumption of drugs or alcohol other than prescribed by a doctor and taken as directed
  • If the claimable injury, illness or death was the result of a pre-existing medical condition
  • If the claim is for a health event such as heart attack or coronary, and you have a body mass index above of a certain level, high levels of blood cholesterol or high blood pressure. These types of exclusions are more common in policies that do not require any medical or blood testing.
  • If the claim is the result of suicide or intentional self-injury, either shortly after taking out the policy or ever
  • If the insured event was the result of certain high risk occupations such as those which involve working at heights over 15 meters, with explosives, underground in mines, on an offshore oil rig or with the armed forces
  • If the insured event was the result of a dangerous pastime like cave or deep sea diving, mountaineering, abseiling, rock climbing or canyoning, or racing cars, motorcycles and other motorised vehicles

You should always look at the exclusions, particularly if your policy does not require medical or blood tests, or is otherwise easier to sign up for. These exclusions are one of the ways some insurers may financially protect themselves from high risk policyholders without requiring tests or examinations prior to signup.

This broadly refers to the ease with which you can adjust your policy and the availability of options, including:

  • Adjusting your cover. This may include adding family members, reducing or increasing the sum insured, adjusting for changed circumstances or lifestyle factors and the removal or addition of new cover. Some policies will let you do this at any time, while others may only offer it at renewal or not at all.
  • Whether you can put policies on hold. Temporarily pausing your life insurance can stop you from having to pay premiums while looking for a new job or adapting to new financial circumstances, without cancelling your cover altogether.
  • The number of potential beneficiaries and the ability to change them. All policies will have a maximum number of beneficiaries, rarely more than five, and flexible policies will let you change these more easily.
  • Indexation for inflation. This feature means your sum insured will be automatically adjusted for inflation, typically to a maximum of 5% per year. It’s a good inclusion for long term policies.

This is the highest sum that will be paid out by your insurer, either for a specific event or in total. Some of the limits you may encounter are:

  • Lifetime limits. This is the most you can claim from an entire policy, or certain parts of a policy, over its lifespan.
  • Individual, partner or family limits. These are the maximum amounts that can be claimed for these groups.
  • Per event limits. Most injuries and illnesses covered by trauma insurance will have maximum amounts that will be paid to cover them. Similarly, income protection and TPD insurance will typically have their own maximums

 This is whether or not you are able to take out a policy or claim for certain things. For example, some policies might require you to be in a certain age group.

  • Age. It can be difficult to take out a life insurance policy over the age of 65 or under the age of 18.
  • Health. Many policies will only cover you if you agree to take a medical or blood test first, or at least fill out a questionnaire. Others may forgo these but will have strict exclusions in place to protect them from having to pay out for expected conditions in high risk customers. For example, a very overweight person might be able to take out a policy without medical testing, but it might not cover them for diabetes-related conditions.
  • Other family members. Children and partners may have their own separate eligibility requirements on policies that offer cover for them.

5 life insurance pitfalls to avoid

Make sure you don’t fall into one of these life insurance traps.

  • Taking the first policy you come across. If you have only considered one life insurance policy then it’s probably not the ideal one for your situation. Compare as many options as you feel able to and read the fine print to better consider their differing costs, cover and benefits
  • Renewing without reading. When the time comes to renew your life insurance policy, check for changing premiums or adjustments to cover. Your policy is a living document and it pays to stay on top of any changes.
  • Putting it off for too long. The older you are the more expensive it is to get life insurance cover. As such it is usually better to take out policies when you are younger. This can also be a problem if you cancel a policy you’ve held for years and then look for a new one.
  • Choosing the incorrect payment structure. Stepped premiums increase with age and are generally less suitable for long term plans while level premiums are typically more expensive initially but stay consistent. Hybrid premiums combine the advantages and downsides of both in varying ways. Choosing the wrong premium structure can lead to a policy becoming unaffordable later
  • Not being honest during the application process. If you lie to your insurer during the application process, this can be used as an excuse to cancel your policy without refund or deny claims. It might lower your premiums slightly, but it might also mean you are wasting money on a policy that will deny any claims anyway. It is not worth the risk.

Should I use a financial advisor?

Although financial advisors aren't essential for taking out personal insurance policies, using an advisor is useful option if you are not comfortable with comparing and applying for a policy by yourself.

Financial advisors can:

  • Help you work out how much cover to take out
  • Assist you in managing investment and savings components of life insurance where applicable
  • Consider whether a life insurance policy fits in with your long term financial plans

The downsides are that there may be additional expenses to using an advisor and they can also be associated with an insurer. In both cases, however, they are required to disclose these things to you ahead of time so you can make an informed decision.

Increasing numbers of Australians take out life insurance policies without the help of advisors. If you are considering a policy without advice, make sure you use online guides to find a policy that works for you.

How can I pay less for cover?

You can get cheaper life insurance by taking a few proactive steps.

  • Live a healthy life. Many insurers give discounts for people with healthy lifestyles and the best policies* often involve medical and blood tests prior to signing up in order to identify health issues. Being in good shape means you are less likely to make a claim and therefore get lower premiums. On the other hand, being in poor physical health, smoking or otherwise having an unhealthy lifestyle will typically bump your premiums up.
  • Look for discounts and you might find them. There are loyalty discounts for sticking with the same insurer for years, multi-policy discounts for having other insurance products from the same provider, family discounts if any members of your immediate family have life insurance from the same company, and more. These can make a big difference to premiums paid in the long run, but should not be the only thing you look for.
  • Actively manage your policy instead of signing up and forgetting about it. Keep your insurer up to date on changes in your circumstances, whether it’s a new child or the loss of a job. Many providers will let you adjust conditions on the fly to keep up with these by adding another kid to your children’s cover or temporarily putting your policy on hold while you find work.

Some final questions you may have

Q. What is the best life insurance policy* for seniors and over age 50?

Unfortunately life insurance gets considerably more expensive as you get older, and many insurers will reject you if you are over 65. It is best to get life insurance when you are younger and then maintain it into old age, but this is not always an option.

If you are looking for life insurance for seniors or over the age of 50, you may consider looking for a specialised seniors healthcare brand, bundling life insurance with superannuation or simply trying to budget for particularly high premiums.

Q. What is the best life insurance policy* for seniors and over age 50?

Unfortunately life insurance gets considerably more expensive as you get older, and many insurers will reject you if you are over 65. It is best to get life insurance when you are younger and then maintain it into old age, but this is not always an option.

If you are looking for life insurance for seniors or over the age of 50, you may consider looking for a specialised seniors healthcare brand, bundling life insurance with superannuation or simply trying to budget for particularly high premiums.

Q. Who can I name as a beneficiary?

Anyone you want. This is usually children or partners, but as the policyholder you have complete freedom to choose the beneficiaries. The only restriction that generally applies is a limit on the number of beneficiaries you can have.

Q. How do I get life insurance with pre existing medical issues?

Your options are more limited, and the more comprehensive policies will have much higher premiums. You may wish to opt for a provider that does not require medical or blood tests or look for cover through your superannuation.

Q. Do I really need life insurance? I won’t be around to use it.

Term life insurance is for looking after your family or anyone else you want to take care of. If no one comes to mind then it might still be worth getting it for bundled income protection, TPD or trauma insurance. Remember that it’s better to sign up for life insurance sooner rather than later as the cost is lower and cover is easier to get. Even if you don’t have any beneficiaries right now, you might at a later date so getting an active policy earlier might be a good move.

Q. Am I covered overseas or just in Australia?

Most policies in Australia will cover you anywhere in the world, but are only available to Australian residents. This might not apply to you, or may carry certain restrictions. Check the insurance PDS to find out how it applies in your case.

Q. Are there any tax benefits?

Yes. Life insurance is often tax deductible, while policies purchased through superannuation are also tax deductible.

Q. Can I get a refund if I cancel my life insurance?

Generally not. There are only three ways you might get a refund. The first is if you are cancelling within the cooling off period (typically within 30 days of signing the policy). The second is if you have paid for the next year in advance, in which case you may be entitled to a refund minus some fees and the third is if your insurer commits a grave breach of good faith and you successfully take legal action. Other than these you will not be able to get a refund.

Compare top life insurance policies from Australian insurers

*The life insurance products compared on this page are chosen from a range of products, Life Insurance Finder has access to track details from and is not representative of all the products available in the market. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking financial advice and consider your own personal financial circumstances when comparing life insurance products.

William Eve

Will is a personal finance writer for specialising in content on insurance. While he cannot give personal advice to clients, Will enjoys explaining the intricacies of different types of protective cover to help individuals and businesses find affordable cover that won't leave them underinsured.

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