What is Death Cover?

Death cover provides security in times of uncertainty

One of the best ways to secure your family’s future is by obtaining a death cover insurance policy. It is a traditional life insurance policy that backs up your ability in meeting your family's financial obligations in case you pass away unexpectedly. Death cover is commonly known as life cover in the Australian market.

What are the key features of life cover?

  • Lump sum payment. Death Cover provides a lump sum payment if the policyholder is to pass away
  • Final expenses. Additional benefits may be provided to cover funeral and financial planning expense
  • Additional cover. Some policies will let you add extra cover e.g. income protection to your policy.

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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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Find a quote with these direct brands

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Life Insurance
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Real Family Life Insurance
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Term Life Insurance
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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
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Get flexible life insurance up to the sum of $2,000,000. $2,000,000 59 21 Get quoteMore info
NobleOak Term Life Insurance
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Get a quote for up to $15 million in life insurance cover. Cover can be tailored to meet your personal needs. $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 the features and benefits of death cover?

Death cover can deliver peace of mind for you and your family. If something happens, this type of insurance can help secure your family's future, and ensure that they don't need to face the burden of financial uncertainty while simultaneously coping with grief.

  • Lump sum payments in the event of death or terminal illness
  • Advance payments to help cover the immediate costs
  • Financial planning and counselling benefits for your family
  • Benefit payments available in the event of serious injury or illness

No one knows what will happen in the future, and it can be hard to tell what the immediate and ongoing effects of loss might have on your family. The range of benefits available with death cover policies can let you minimise the impact as far as possible, and take proactive steps to care for your children and partner.

Whether you want to ensure that your family can maintain their quality of life, not have to struggle with debts and mounting bills in your absence or simply want to minimise the financial burdens of loss, you can choose cover to suit.

What type of expenses am I covered for?

Some of the expenses that death cover can provide relief for, include:
  • Rent or mortgage repayments
  • Children’s education expenses
  • Daily living expenses and needs, such as food and clothing
  • Costs to hire housekeeper or nanny
  • Home maintenance costs
  • Funeral expenses
  • Legal expenses
  • Estate settlement costs

How do I determine my life insurance needs?

It is difficult to set a standard insurance policy that would apply to all policy holders. There is not just one death cover that can be considered to be ideal to all, which is why it is important to assess and compare different policies to determine which plan would be most suitable to you and your family's needs. Deciding on the death cover amount to insure may not be such as a simple task, but the best way to calculate the right amount to match your needs, consider:

  • You current annual income. Replacing your lost income for the years required
  • Short-term and long-term debts. This often includes mortgage, credit card debts, personal loan, and car loan
  • Your immediate expenses. This includes food, clothing and shelter (rent payments, if you don't own your home)
  • Your children's education expenses. Consider the number of children you have and their respective ages to determine the total amount of expenses
  • Emergency funds. Work out how much of your expenses such as a funeral arrangement, medical treatments, legal fees and estate settlement costs can be covered by your savings.

You can use a life cover calculator to give you an indication on how much you may need for a death cover. If you require further assistance, an experienced death cover agent can help you in determining an ideal amount that will match your needs situation, as well as providing tailored advice on life policies that suit what you require.


What forms of death cover is available?

The two main types of life insurance are term life insurance and funeral cover, both of which can pay out the full sum insured on death. If you are not eligible to obtain term life insurance (such as due to medical conditions or age), a funeral plan may be a good option.

Term life insurance is generally a more flexible and detailed type of cover than funeral insurance. It lets you choose from a wider range of benefits and payout conditions that suit your needs, and will often have significantly higher maximum benefits than funeral insurance. Generally a term life insurance policy is designed to help provide for one's partner or family in years to come, and can be adjusted over the years as you enter different life stages, and your financial needs and obligations change.

A funeral plan lets you take out a specific amount of cover, such as $20,000, which is paid to your beneficiary when you die and can be spent at their discretion. It can be an important form of cover to help with the administrative costs and mortuary fees, as well as the funeral itself. For example, your beneficiary might use it to help the rest of your family travel to the funeral when it might otherwise be cost-prohibitive, make sure their own affairs are in order or anything else. You can generally have two people on the same funeral plan, and should either one pass away, the other can receive the benefits. This can make it a useful and relatively affordable way of planning ahead.


Death cover for different life stages

You're relatively young and healthy and your premiums are reasonably low. You might be single, or you might have a family and dependents, and can find a level of cover to suit. As your responsibilities grow you will typically be adjusting your policy and increasing your level of cover later on. Here, additional disability cover with term life insurance can deliver an important extra layer of protection for you in the event of life-changing accident or illness.

You may be more likely to be married with children, your partner might not also be working like when you were younger, and you might be bearing more financial obligations. Investments and debt can also make up a significant portion of your finances which should be considered when comparing life insurance policies or adjusting cover. You might have children, or be planning for kids in the future, and their age will determine how far ahead you need to plan for their education expenses. Disability can be just as significant a concern as death, and could derail your plans equally, putting you and your family in a difficult position. With more assets, more costs and more dependents, as well as your retirement to think about, a comprehensive and versatile life policy can be important in this life stage.

At this point your children have likely moved out and you're looking towards retirement. It's time to start thinking seriously about health issues as they're becoming much more likely with advancing years. Protecting your investments and assets through life insurance may be an important part of retirement planning, and paying off the mortgage and other debt before retirement is also a concern. Don't underestimate the level of cover you might need in order to provide for a long retirement spanning several decades. Consider your children's circumstances when looking at policies, as well as the likelihood of your partner being able to return to the workforce if something happens.

After retirement, your financial obligations will generally have decreased, but naturally so has your income. You can get cover to help you keep up with your plans, such as travelling, in line with your financial capacity. The assets you've spend a lifetime building may need to be protected, as might other continuing financial obligations towards your partner or other dependents. Estate planning and aged care costs can be worth considering, as are growing medical expenses or costs relating to other health needs. Financial planning might also be important to consider, specifically in the form of estate tax mitigation and budgeting for an extensive retirement with many years ahead. The policy to match that budget and help you maintain your lifestyle, while protecting important obligations, can depend largely on your circumstances, such as your age of retirement and current income from assets.


Can death cover pay for accidents and injuries?

In the event of a fatal accident or injury, death cover of both types, funeral plans and term life insurance, can pay out, while some benefits may also be available for survivable accidents or injuries, although these are generally only available with term life insurance policies.

With funeral plan insurance policies, you may be able to institute a premium pause in the event of financial hardship, while still retaining cover for accidental death. This can let you stop paying premiums for a limited time, such as 3 months, while still knowing that the policy will pay out in the event of an accidental death.

The accidental death benefit available with term life insurance policies can pay out an additional amount should your death be the result of an accident, in order to help compensate for the suddenness of the event and additional costs that may be associated. This may only be available with term life insurance policies.

For severe but survivable accidents you may also be able to link additional forms of cover to your policy including:

  • Trauma, serious injury or serious illness cover: In the event of specified health events you can get paid lump sum benefits. The specific events covered will vary between policies, but can include cardiac arrest, cancer, loss of limbs, blindness, heart surgery and many others.
  • Total and permanent disablement or income protection insurance: Should you suffer an accident, injury or illness that leaves you permanently disabled, this type of policy can pay benefits. Depending on the type of cover, disabled might be defined by an inability to work, an inability to perform specific tasks or a percentage measurement of disability based on your physical injuries and loss of function.

What is funeral cover?

Funeral cover is a simple insurance product that can provide many benefits and you have the flexibility to choose the amount you want to insure yourself for. If you are in the older age group and have little debt all, you may want to consider a funeral plan that will take care of your funeral costs, which can be quite considerable in this day and age. Funeral costs are the type of expenses that you wouldn't want to burden your loved ones with and with a funeral plan in place, your family can be rest-assured that they can afford the arrangement that you would've wanted.


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Richard Laycock

Richard is the insurance editor at finder.com.au. He is on a mission to make insurance easier to understand.

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