How do I know if I actually need life insurance?

Think you might need life insurance but don't know where to start?

Life insurance is designed to provide immediate and ongoing support to those financially dependent on you if you were to pass away or suffer a serious injury or medical condition. Life Insurance ensures your loved ones aren't left to experience financial hardship by covering existing debts and everyday living expenses. The first step for anyone looking to take out life insurance is to determine if they actually need cover and if so how much cover they require.

Questions you should ask yourself ...

"Can my loved ones get by without my financial support?"

  • No - They are dependant on my financial support

Everyone is different and will require different levels of cover. Get a more comprehensive understanding of your individual policy requirements by speaking to a qualified adviser.

  • Yes - My loved ones will be just fine
While you may feel that because you don’t have anyone financially dependent on you there is no need to take out cover...this may not necessarily be the case. Other forms of “living insurance” such as Trauma and TPD cover ensure that you are supported financially if forced to take temporary or permanent time off work due to serious injury or illness.

"Do I have enough to support myself financially for an extended period of time if I am unable to work?"

  • No - I will need additional financial support

There are many types of cover to protect yourself against financial pressure if you were no longer able to work due to a serious illness or injury. An insurance consultant can guide you through the process of identifying the type of cover you may require and help you tailor cover closer to your needs through additional benefits. The different types of "Living Insurance" are listed below:

Income Protection:

Will provide 75% of your income paid monthly if you are forced to take time out of work due to an illness or injury. Some policies will provide additional payments to cover rehabilitation expenses

Total & Permanent Disability (TPD) Cover:

Provides a lump sum benefit in the event you suffer total and permanent disablement as defined by your policy. The benefit is usually paid if a medical practitioner deems you are not capable of returning to your previous occupation

Trauma Cover:

Often purchased with life cover, trauma insurance will provide a lump-sum benefit if you suffer a serious medical condition such as stroke, cancer or heart attack. Some policies will cover up to 50 different conditions

  • Yes - I have supplementary cover from other insurance policies to help me cope

While most Australian’s have some sort of cover in their Superannuation Fund, Health Insurance or WorkCover policy. What most people don’t know, is the default cover provided is usually only a portion of what they will actually require in the event of death, serious illness or injury (sometimes as little as 20%).

If you're not sure about whether the cover provided by your employer or super fund is enough, it may be worthwhile to find out exactly what you stand to receive in the event of a claim and comparing this to what you actually require. An insurance consultant can also help you review your policy.

You may require different cover based on where you are in life ...

AgeLife EventsFinancial ObligationsTypes of Insurance to Consider
  • Start full-time work
  • Move out of home
  • Start accumulating wealth
  • Everyday living expenses
  • Small personal debt
  • Income Protection
  • Increase in income
  • Purchase house
  • Increase in short-term debt
  • Marriage
  • Children
  • Short term debts
  • Spouse and children
  • Everyday living expenses
  • Mortgage
  • Life cover
  • Income protection
  • TPD
  • Trauma
  • Increase in earnings
  • Reduction of debts
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
  • Life cover
  • Income protection
  • TPD
  • Trauma
  • Maximum earnings
  • Preparing for retirement
  • Less financial commitments as children move out
  • Outstanding mortgage and personal debt
  • Investments
  • Everyday living expenses
  • Retirement fund
  • Life cover
  • Income protection
  • TPD
  • Trauma
55 and Over
  • Protecting wealth accumulated
  • Retire from full-time work
  • Finance lifestyle with savings
  • Everyday living expenses
  • Any outstanding debts
  • Medical costs
  • Funeral Costs
  • Life Cover
  • Trauma Insurance
  • Funeral 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

Name Product Maximum cover Maximum Entry Age Minimum Sum Insured Guaranteed Future Insurability Expiry Age Short Description
Get a quote for up to $15 million in life insurance cover. Cover can be tailored to meet your personal needs.
Choice of cover options and flexible premiums to suit budget. No lock-in contracts and fast application.
Receive a discount of 10% on life insurance as a Woolworths Rewards Member. T's and C's apply.
Get flexible life insurance up to the sum of $2,000,000.
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .
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.

Compare up to 4 providers

Additional information

What can a life insurance benefit cover?

  • Outstanding debt such as mortgage, credit card debt and other existing loans
  • Everyday living expenses such as food, fuel, clothing and utility bills
  • Education and childcare fees
  • Funeral expenses
  • Medical treatment if policyholder suffers serious medical condition (via Trauma insurance)
  • Modification to home and rehabilitation expenses (via TPD insurance)

These are just some of the expenses that may need to be covered following death or serious illness or injury. Most policies will offer additional cover options to help you tailor your plan closer to your needs.

Why do you need life insurance if ...?

    • I've already got life insurance in my super...why consider other cover?

Many people forget that the default cover provided through superannuation is usually only a portion of what they will actually require in the event of death, serious illness or injury (sometimes as little as 20%). It’s also worth noting that some funds may be quite restricting in the level of cover available and may not be able to provide all types of cover with Trauma insurance not available via superannuation.

    • You are young, single with little debt and have no kids...why consider cover?

What about if you were forced to take months or even years off work due to illness or serious injury? It could be worth thinking about income protection.

    • You are already covered by workers compensation?

Workers compensation will only provide cover for illness or injury that has occurred at the workplace...even injuries that occur on the way to work are no longer covered.

    • You are retired and over 60?

Your kids might be more financially dependent butIt could still be worth considering to cover any existing debts, medical treatment if you suffer a trauma event and any final expenses.

    • You don't work and your partner has life insurance policy?

Many people are surprised by the cost that can be incurred from the loss of a homemaker. Expenses such as funeral costs, childcare, transport, house care and maintenance can have a significant impact on the family income following the loss of a stay at home parent. You may not require the same level of life cover as your partner but it may still be worth considering TPD and Trauma cover or taking out a joint policy with your spouse. A joint policy will payout on the first death of a couple and can bring premium discounts of up to 15%.

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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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