Is life insurance worth it?

Wondering if life insurance is worth it? Here's how to figure it out.

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Life insurance won't be the most exciting thing you ever buy, so it's easy to put it off. Just remember, for some people, it ends up being one of the best decisions they ever make.

That's because life insurance is there to help when things go seriously awry. It can cover medical bills if you get sick and keep a roof over your head if you can't pay the mortgage.

It can also give you the financial freedom to focus on getting better after an injury and make sure your family is well looked after in the event of your death.

Yes, life insurance comes at a cost, but it might not be as pricey as you think. A healthy 40-year-old can easily get $200,000 cover for around $10 a month.

Get a quote and see if life insurance is worth it for you

Name Product Maximum cover Maximum Entry Age Fully Underwritten? Terminal Illness Benefit Optional Extras
NobleOak Life Insurance
TPD cover, Trauma cover
Cover up to $15,000,000 with NobleOak Life Insurance.
Real Family Life Cover
TPD cover, Trauma cover
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .
Medibank Life Insurance
TPD cover, Trauma cover
Medibank health members save 10% on premiums every year. T&Cs apply.
Zurich Ezicover Life Insurance
No optional
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
TPD cover, Trauma cover
ahm Health members can save 10% off premiums.

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5 reasons life insurance is worth it

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Peace of mind
Life insurance can give you peace of mind that you'll be able to afford the bills if you can no longer work due to illness or injury. That means you can focus on getting better, instead of worrying about falling into debt.

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Protect your family.
If your family would struggle to get by without your income, life insurance can give them a financial safety net. It could cover your children's school fees, let them stay in the family home or even pay for life's everyday expenses.

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Medical care. Life insurance can pay for rehabilitation and private healthcare costs if you suffer a serious accident or critical illness. It can cover the cost of installing medical equipment in your home and ensure you get the best care possible.

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Quality of life. Life insurance can pay for home renovations if your mobility changes or for a carer so you can maintain independence. It can also pay out if you're diagnosed with a terminal illness, so you can spend the money making the most of the time you have left.

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It's reliable. Despite what you may have heard in the media, relatively few life insurance claims are denied. Studies from ASIC and APRA show that over 90% of all life insurance claims are paid by Australian insurers.

When is life insurance a good idea?

There are lots of different motivations for buying life insurance. Some of the main reasons are:

  • If your family relies on your income. If your family would face financial hardship without your salary, it's a good idea to get life insurance which protects your income or pays out a lump sum.
  • If you have little savings. Would you be able to cover your bills if you were out of work for a few months, or even years? If not, life insurance could save you some serious stress.
  • If you're self-employed. Workers compensation doesn't cover self-employed people so if you're injured or killed on the job, you won't receive a benefit. Life insurance is a great alternative.

Which life insurance is right for me?

Life insurance is an umbrella term which covers several different types of insurance. You can buy standalone policies or bundle them together for more comprehensive cover. The six main types of life insurance are:

  • Life (death cover). Pays a lump sum benefit to your family in the event of your death or to you if you are diagnosed with a terminal illness.
  • Income protection. Pays a monthly benefit to you if you are unable to work due to illness or injury. It's designed to replace a portion of your regular income.
  • Trauma insurance. Pays a lump sum benefit if you're diagnosed with a specific medical condition, such as major head trauma, stroke or heart attack.
  • TPD insurance. Pays a lump sum benefit if an injury or illness renders you totally and permanently disabled. May pay a partial benefit if you are partially disabled.
  • Funeral insurance. Pays a lump sum benefit to your family so they can cover the cost of your funeral after your death.
  • Accidental injury/death. Sometimes called personal accident insurance, it provides a lump sum benefit if you are injured or killed accidentally. This does not include cover for illness.

When is life insurance not necessary?

Although life insurance is a worthwhile investment for lots of people, there are some situations in which it's just not necessary. We'd encourage you to think twice about life insurance if any of the following apply to you:

  • You have extensive savings or assets. If you've already accumulated enough wealth to live comfortably or have income streams that can protect your family after your death, there may not be a need for life insurance.
  • Your family does not rely on your income. If your partner earns enough to maintain your family's lifestyle, you may not need life insurance. Having a policy could still reduce stress for your partner, but it may not be considered essential.
  • Your children are financially independent. If your children have become self-sufficient adults, you may want to reconsider life insurance. Once your children reach a certain age and become financially independent, any benefits they receive are taxed.

Is life insurance worth it for a single person?

In some situations, yes. Remember, life insurance doesn't just pay out when you die, it can also pay out if you're seriously injured or fall critically ill. Single people can see lots of benefits from a life insurance payment, including:

  • Help covering the bills, like rent or your mortgage, while you're recovering
  • Money so you can retrain, if you're no longer able to do your usual job
  • Money to pay for private healthcare or home nursing
  • Money to pay for home renovations if your mobility is impacted
  • The cost of a funeral covered, so you receive your preferred burial or cremation

Are the benefits of life insurance worth the cost?

That depends entirely on your own personal circumstances. The cost of life insurance varies depending on lots of different factors, including your age, overall health and chosen coverage amount. That's why it's so important to get a quote, before you decide whether it's worth it.

If you have financial commitments, such as a mortgage, which you wouldn't be able to cover without your income, life insurance is a good idea. Particularly if you have children who are financially dependent or your partner relies on your income.

However, if you're a senior with poor health, your life insurance policy will be more expensive than that of a healthy young person. If your kids and partner are financially independent or you have investments that would provide income even after you could no longer work, you may decide the regular premiums just aren't worth it.

Of course, the decision is entirely up to you. Everyone's personal circumstances are different and we can't tell you what's right in your case.

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