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Do I need life insurance to buy a house?

You don’t need life insurance to buy a house in Australia but there are a few situations where it can be worthwhile.

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What you need to know

  • Life insurance is not compulsory when you buy a home.
  • It might be worth it though – it can pay off your mortgage if you die.
  • Only home insurance is compulsory when you buy property.

Do I need life insurance to buy a house?

No, you aren't legally obligated to take out life insurance when you buy a home.

Taking out life insurance when you buy a home is only worthwhile depending on your circumstances – it's not essential for everyone. It's not like home insurance which you almost always need to have in place before you move in.

Who needs life insurance?

The main reason for buying life insurance is to make sure that your mortgage would be paid off (or at least partially paid off) if you died.

This is probably only important for some people. For example, it could be really helpful if you've just bought your family home with your partner and they wouldn't be able to continue paying the mortgage without your income.

However, it's probably not particularly helpful if you're single – in which case the house would simply be sold – or your partner is comfortable downsizing.

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Life insurance inside super
Every Australian has access to life insurance inside their super. The payout is typically much lower than standard life insurance and policies expire when you're 65 or 70, but if you're just looking for some financial security, this might be enough.

Can life insurance cover my mortgage repayments if I can't work?

No, life insurance only pays out if you die or become terminally ill.

However, income protection insurance can help in this type of situation. If you get sick or injured and need to take time off work, it can pay you up to 75% of your monthly income. In some cases, it can also cover involuntary redundancy.

You may have also heard the term mortgage protection insurance come up when buying a house. Like income protection, it kicks in if you can't work. However, unlike income protection, it only covers your mortgage repayments so it's often not great value for money.

Homeowners who might want income protection

If you're worried about how you'd pay for your mortgage if you got sick or injured, you should consider getting income protection.

That doesn't mean everyone needs income protection though. For example, some couples might be able to get by on 1 income; others might have some savings.

What about lenders mortgage insurance?

Lenders mortgage insurance (LMI) and life insurance are 2 different products. LMI is protection for your lender, not for you. LMI doesn't cover you if you miss your mortgage repayments.

Compare policies online

If life insurance or income protection seem like a good idea to you, our best life insurance and income protection pages have made it easy to find a policy online. Also, it's free to use and we'll never charge you for clicking through to one of our partners.

1 - 7 of 16
Name Product Maximum Cover Maximum Entry Age Terminal Illness Benefit Average Claims Acceptance Rate Average Claim Time Sum Insured
NobleOak Life Insurance
$15,000,000
69
$15,000,000
98.1%
1.1 months
$20,230 million
Get 2 months free when you apply for one or more life insurance types with NobleOak's Premium Life Direct policy before 30 June 2022. T&Cs apply.
TAL Life Insurance
$2,000,000
74
$2,000,000
87.10%
2.9 months
$36,630 million
Finder verifies that TAL has more Australian lives insured than any other provider - for 3 years in a row. Plus, get up to 15% off with TAL’s Health Sense program.
Real Family Life Cover
$1,000,000
64
$1,000,000
90.20%
1.8 months
$53,462 million
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™.
Medibank Life Insurance
$2,500,000
70
$2,500,000
87.30%
3.8 months
$31,745 million
With Medibank Life Insurance, you’ll also get access to the 24/7 Medibank Nurse phone service. Medibank health members will save 10% on premiums every year. T&Cs apply.
Zurich Ezicover Life Insurance
$1,500,000
69
$1,500,000
Data not available
Data not available
$12,444 million
Get your first month free and a 10% discount by taking out a second life insurance policy (discount applies to the second policy). T&C’s apply.
ahm Life Insurance
$1,500,000
65
$1,500,000
87.20%
3.8 months
$31,745 million
Get ahm life insurance by 30 June and keep your cover for 6 months to receive $100 cashback. T&Cs apply^.
RAC Life Insurance (Only available in Western Australia)
$25,000,000
69
$25,000,000
98.10%
1.1 months
$20,230 million
When you purchase RAC Life Insurance, WA residents receive complimentary RAC membership which includes access to discounts on fuel, savings on shopping, entertainment and more. T&Cs at rac.com.au.
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