Even if you don’t remember taking one out, you could already have a policy. Here's three places to check:
You might already have a life insurance policy through either of the following:
- Superannuation life insurance. Life insurance inside superannuation usually includes life insurance.
- Your employer's default fund. Employer superannuation funds are legally required to include life insurance. If you are using your employer’s default fund, you almost certainly have a life insurance policy.
- Other types of group cover from your employer. Even if you are not enrolled in your employer’s superannuation fund, your employer may already provide you some form of group cover.
Why is life insurance included in my default fund?
Without cover, many children and surviving partners may struggle with an enormous financial burden if a family member is to pass away. Including life insurance is mandatory for default super funds, to help close Australia's underinsurance gap. A default super fund will typically include a basic level of life insurance cover.
You have the option
- Increase this amount
- Decrease it
- Cancel or opt-out of cover
How do I check for existing life insurance policies?
Check your super fund
Go to your superannuation fund’s website, and look for the Product Disclosure Statement. It should be clearly visible, but if you’re having trouble finding it you can contact them and ask for the company to mail it to you. This will include details of any life insurance policy.
- You may already be paying for cover. The premiums of a super life insurance policy are taken from your superannuation contributions.
- Track down any lost super funds through the ATO. If you’re not sure whether you have more than one super fund, this is a good first step.
- If you have more than one superannuation fund, check each of them for life insurance cover.
Check with your employer
If you do have cover, request a copy of the Product Disclosure Statement to examine your policy and see whether you have enough cover.
Is the insurance I already have enough?
The right amount of life insurance cover is dependant on individual circumstances. Cover that’s included inside a super fund is set a basic level that may be suited for some policyholders but not for others.
1. Look at the sum insured of your policy.
This is the total amount that your beneficiaries will receive in the event of your death. Ideally, it should be high enough to cover all of the following:
- All outstanding debt. This includes outstanding taxes, the mortgage, credit card debt and anything else. The payout should leave your family completely debt-free.
- Immediate expenses. Funeral expenses, estate settlement costs and other costs your family will be facing.
- Ongoing living expenses. An effective policy will cover your food, shelter, clothing and transport costs for your family. You can anticipate healthcare costs by considering the annual premiums of health insurance policies. If you have children, it should be enough to last until they are able to become financially independent.
- Other major expenses. These can include the cost of education for your children, any business succession planning that may be required and other major expenses that are likely to arise.
- A buffer. The above is naturally not a comprehensive list of all expenses, and it can be prudent to add extra on top for unpredictable costs, such as if your partner lives well beyond the age of 100.
2. Consider these factors as well
You can then calculate the amount needed by considering the following:
- The age of your partner and children
- Your partner’s earning capacity
- The value of your assets, and whether these will be sold or maintained
It’s hard to add it all up, and you might consider starting high or low, and then working forwards or backwards until you’ve found a reasonable sum that results in affordable premiums and effective cover.