If you get seriously ill, become disabled or die unexpectedly, life insurance can help cover any existing or future expenses for your family. In this guide, we explain what life insurance covers, how much it costs and how to get it in Australia.
What is life insurance and how does it work?
Life insurance is an agreement between an insurer and an individual in which the insurer agrees to pay a chosen beneficiary a sum of money in exchange for a premium upon the death of the insured.
Practically, it provides you or your loved ones a lump sum payment or a regular income if you pass away, are sick or injured or are diagnosed with a terminal illness or disability.
Life insurance can help your family to cover ongoing expenses, such as mortgage payments, help cover funeral costs, or act as a cash gift.
Life insurance glossary: Get started with understanding the key terms
A rundown of the tricky definitions for life insurance. Plus, what to look for when you're comparing.
Beneficiary
The person you've nominated to receive your life insurance payment if you pass away or become terminally ill. You can nominate anyone as your beneficiary. There can be more than one beneficiary and each beneficiary can receive different amounts.
Children's insurance
Covers your child for death, terminal illness or a serious injury or illness that's specified in your policy. Typically, children's cover needs to be added as an optional extra.
Finder looked at 16 policies on our database and found just a few give you the option of adding a child to a policy.
Cooling-off period
The amount of time in which you can cancel your policy after signing up – and get a full refund of any premiums paid. The vast majority of insurers offer a cooling-off period of up to 30 days.
Counselling benefit
Some insurers will pay costs for grief counselling sessions for you or your partner. Counselling benefits usually have a limit of around $1,000. It can be claimed after a death or terminal illness claim.
Exclusion
An exclusion is any specific risk or event that you can't claim for under your policy. Insurers can apply exclusions to certain pre-existing medical conditions. For example, they may not cover any claims related to mental health.
Exclusion period
How long you'll have to hold your insurance before a policy exclusion turns into a claimable event. For example, it's common for suicide to have a 13-month exclusion period.
Fully underwritten
With a fully underwritten life insurance policy, your application is assessed upfront. Whereas a policy that isn't fully underwritten is assessed at the time of a claim.
Pays a lump sum benefit – usually up to $15,000 – so your loved ones can meet the cost of your burial or cremation without using their own money.
You could look for a funeral policy offering a guarantee that any payout won't be less than the total you've paid in premiums. This is sometimes called a premium guarantee.
Guaranteed acceptance
You can get insurance without having to answer any health questions, or take a medical exam or blood tests.
Guaranteed acceptance policies, also known as auto-acceptance policies, will have an age eligibility requirement. This can range between 16 and 80 years of age.
Guaranteed Renewability
The insurer lets you renew your coverage each year, as long as you keep paying for your premiums. Many life insurers in Australia offer this peace of mind.
Income protection insurance
Income protection insurance pays a monthly wage if you need to take time off work due to a sudden accident or illness. Many insurers will pay up to 70% of your pre-tax income.
Inflation protection
This ensures your premiums keep up with inflation so that your amount of cover is worth as much by tomorrow's dollar. You can ask your insurer to switch off this automatic policy feature, but it could leave you underinsured.
Interim accident cover
Insures you while your life insurance application is being underwritten or waiting to be approved. Typically, interim insurance will cover you for up to 90 days.
Joint life insurance
A policy that covers 2 people, but it pays out one time. A lump sum goes to the other policyholder in most cases.
Joint life insurance can be a cheaper option than two single policies. But it's potentially complicated if a relationship ends.
Level premium
Your insurance generally won't increase in price as you get older. You'll usually pay more in the beginning but they offer more certainty over time. Only a few direct insurers in Australia offer level premiums.
Loading
Essentially, you have to pay a bit more to include your health condition, job or hobby in your policy. Any loadings will be offered during the life insurance application process.
Minimum cover
The smallest amount of insurance (or, sum insured) you can take out. Many insurers in Australia set a minimum cover level of $100,000.
Maximum cover
The cover limit offered by an insurer. It's the most you can be paid out after a claim. Maximum cover limits can range from $500k to $25 million. TAL told Finder it had "no set limit" for a payout.
Maximum entry age
The maximum age you can be to apply for life insurance. Common age caps are 64 or 65, but some providers go up to 70+.
Some insurers will require you to have a physical examination before you're approved; others will just need you to answer questions about your medical history on your application form.
Monthly benefit
A regular monthly payment if you're unable to work due to illness or injury. It's designed to replace a portion of your regular income. Monthly benefits are a common feature of income protection policies.
Mortgage protection insurance
Insurance that can cover your mortgage repayments if you have a serious illness or pass away. Mortgage protection will only cover your mortgage repayments, not all the other bills you'd need to pay if you lost your ability to earn an income.
Personal accident insurance
Insurance to replace your income if you are temporarily unable to work after an accident. This cover can be bought as a standalone policy. Keep in mind it won't cover you if you get sick and can no longer work.
Personal insurance
An umbrella term for the following 4 core types of life cover: Life insurance, Total and permanent disability (TPD) insurance, trauma insurance and income protection cover.
A condition you have, or have had, prior to taking out life insurance.
You may be able to get life insurance that includes cover for a defined medical condition. It's likely to cost you more. However, if an insurer thinks your condition is too high risk or isn't under control, they'll exclude it from your policy.
Premiums
The amount you pay an insurer for your cover. Premiums can be paid weekly, fortnightly, monthly or annually.
A policy option that lets you stop paying premiums entirely. You will typically lose all your cover while your policy is suspended.
Not all life insurance policies include a suspension of cover benefit. Check with an insurer directly.
Premium freeze
A premium freeze lets you stop your premiums from increasing as you age.
It's only available with stepped premium policies because the cost rises with age. By activating a premium freeze, your level of cover will drop over time.
Retail life insurance
Buying life insurance through a broker, who will give you tailored advice on securing cover. Buying a retail policy is one of 3 ways to get life insurance in Australia. The others are directly with an insurer or through your superannuation.
Salary continuance
You can receive up to 75% of your regular earnings each month to cover general living expenses if you can't work due to an accident, illness or injury
Salary continuance insurance is held within a super fund, and you'll pay your insurance premiums from your super balance rather than directly from your bank account.
Typically, to be classed as a 'non-smoker' you'll need to be free of any smoking products for 12 months, but this can vary between insurers.
Stepped premiums
How much you pay for your policy increases each year by a certain percentage. Most policies in Australia have stepped premiums. Yearly increases can range from 2% to 7%.
Term cover
A type of life insurance that provides a set amount of cover for a set amount of time (or, 'term'). The maximum cover offered by term policiescan range from $100,000 to $1 million.
Terminal illness benefit
An insurance which pays out a lump sum if you're diagnosed with an illness which cannot be cured, such as advanced cancer. Benefits can range from around $1 million to as much as $25 million in Australia. It's usually included with a life cover policy.
Total and permanent disability (TPD)
An insurance that pays a lump-sum (as high as $5 million) if you get sick or injured and become permanently disabled. In most cases, TPD cover is available as an add-on when you take out life insurance.
Trauma insurance
A type of insurance that pays out if you are diagnosed with a critical illness or suffer a life-changing injury that's listed in your policy. Examples can include cancer, heart attack and stroke. Trauma insurance pays up to $2 million as a lump sum.
Underwriter
When you apply for cover, the insurance underwriter assesses your level of risk and determines whether the insurer should offer you cover, as well as under what conditions that cover should be offered.
You could check to see if a policy has been underwritten by a major insurer, backed by many years of experience.
Finder survey: How many Australians understand how life insurance works?
Response
Yes
66.31%
No
33.69%
Source: Finder survey by Pure Profile of 1110 Australians, December 2023
What does life insurance cover?
There are 6 types of insurance that come under the term "life insurance". You can choose which types of protection you want included in your policy. Choosing more cover will cost more but can also bring more peace of mind.
Pays out a lump sum to your family when you die, which they can use to cover the cost of your funeral.
Work out how much life insurance you need
There is no one-size-fits-all approach with life insurance; everyone's circumstances are unique.
That being said, you could take out even the best life insurance policy out there and still not have enough cover if you’re underinsured. Here are a few ways you can work out how much cover you need:
Look at your lifestyle and financial responsibilities
It's a good idea to consider:
Outstanding debts. How much debt do you have left that would be passed on to your family?
Financial safety nets. Do you have any savings, assets or existing insurance that can help cover your family's living expenses if you aren't around?
Living expenses. Work out how much you and your family spend on things like food, rent and education.
Cover period. How long would you like to be covered for? This could depend on your savings, the size of your family and your household income.
Using a calculator
You can use our life insurance calculator to work out a rough estimate of your cover needs. This may help when you're speaking to an adviser or applying directly with an insurer.
Answer a few questions about your assets, debts and cover to get an estimate on how much life insurance you might need.
To give you a better idea of how much you might pay, our 2023 Finder Awards research team looked at 11 Australian providers to compare life insurance quotes. This is what we found:
Average life insurance rates for women – monthly
Amount Insured
30-year-old
40-year-old
50-year-old
$500,000
$29.18
$46.54
$107.18
Average life insurance rates for men – monthly
Amount Insured
30-year-old
40-year-old
50-year-old
$500,000
$42.09
$62.36
$106.72
This is based on the average costs for a non-smoker with no pre-existing medical conditions, earning a gross annual income of $70,000 (as of Febuary 2023). Prices are subject to change.
Generally, there are 3 different ways to purchase life insurance:
Find your own policy
You can compare policies yourself, work out what kind of cover you want and determine which life insurance policy is right for you.
This gives you the advantage of being able to tailor your policy to your needs, apply quickly online or over the phone and often be covered straight away.
You'll pay premiums through your superannuation contributions, so it won't affect your daily cash flow.
📌 However, this type of cover is limited and may not be enough to cover your specific circumstances.
Things you need to know before you apply:
Be honest in your application. If you lie in your application, your cover may be voided later down the line, and you won't receive a refund for any premiums that you've paid.
Know how much cover you need. Experts recommend that your life insurance covers at least 10 times your annual income, but the exact amount varies for everyone. You can use our life insurance calculator below to work out a rough estimate.
Understand your waiting period.A waiting period is the length of time you will have to wait before you receive any benefits for an income protection claim. This can be between 1 and 3 months.
Break down ongoing premium costs. Life insurance premiums tend to increase as you get older. Make sure you will still be able to afford payments 10, 20 or 30 years from now.
Your benefits might be capped. The amount of life insurance you qualify for can be affected by how much you earn and your medical history.
Think carefully about your beneficiary. In the event of your death, your beneficiary will receive your life insurance payment. Think carefully about who you would like to receive the payment and let them know.
Top picks for life insurance in Australia
Top pick: Winner
NobleOak Life Insurance
Finder Award
$25 million sum insured
1st place in Finder Awards: 8.45 final score
Fully underwritten policy
Cheapest average policy price
Top pick: Finalist
TAL Accelerated Protection Life Insurance
Finder AwardBonus
Pays up to $5 million in TPD
2nd place in Finder Awards
Interim accident cover
$25,000 funeral advancement
Top pick: Finalist
RACWA Life Insurance
Pays up to $25 million
3rd place in Finder Awards
TPD and trauma options
$15,000 funeral advancement
We picked these policies after analysing the results from Finder's life insurance awards for 2023.
NobleOak Life Insurance: NobleOak's maximum payout for death or terminal illness is $25 million. Most providers offer cover limits of between $1 and 2.5 million. With NobleOak, you can add as much as $5 million in TPD cover – the most out of all 10 providers we analysed for the 2023 Finder Awards.
TAL Accelerated Protection: TAL's life insurance scored highly on price in the most recent Finder Awards. It was the second cheapest provider across 4 age groups – it also offers a comparatively strong policy. It pays $25,000 in funeral expenses and you have the option to add children's cover. It also offers flexibility by not setting a maximum benefit limit.
RAC Life Insurance: RAC life insurance is underwritten by NobleOak. This means it offers similar cover levels, high benefit limits (RAC goes up to $25 million) and quality add-ons. Our research team found NobleOak was more competitive than RAC on cost – by $75 per month on average (factoring in smokers and non-smokers).
Compare more life insurance options and get a personalised quote
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Why compare life insurance with Finder?
You pay the same price as buying directly from the life insurer.
We're not owned by an insurer (unlike other comparison sites).
We've done 100+ hours of policy research to help you understand what you're comparing.
How are life insurance premiums structured?
Your life insurance premium structure can have a big effect on how much you'll pay for your policy. Generally, you'll find 2 different choices available:
Stepped premium. With a stepped premium, the insurer updates your premium once a year and increases it based on your current age. This means the cost of your insurance could increase significantly over time.
Level premium. With a level premium, the cost depends on your age at the time you purchased the policy. It won't be updated as regularly and shouldn't increase too much over time.
Some policies will let you choose whether you want a stepped or level premium, while others will only have one premium structure available.
Your beneficiaries will have financial protection if you die unexpectedly or are diagnosed with a serious illness.
Life insurance benefits in Australia are usually paid out tax-free.
It can help your loved ones pay for your funeral in the event of your death.
Benefit from lower premiums while you're young.
Cons
You'll need to factor monthly premiums into your budget.
The claims process can be long-winded, and payout isn't always granted.
Ensure you read the small print, as each company includes specific things that may void your policy.
Term life insurance will only cover you for a specific period of time (between 10 and 30 years).
Premiums can increase as you get older.
Can I bundle my insurance together?
You can choose whether to take out different types of life insurance under one policy or purchase standalone policies. If you choose to take out standalone policies, you will need to let each insurer know that you have multiple life insurance policies that are active.
Bundled life insurance
This usually includes term life insurance plus a number of other cover types. You will have a single sum insured for the entire policy, which will be reduced if any part of the policy pays out.
Example: You might have a bundled life insurance policy with term life insurance and TPD insurance. The total sum insured is $1 million, and the TPD sum insured is $500,000. This means that if you die, that policy will pay $1 million, and if you become permanently disabled, the policy will pay $500,000. However, if you claim TPD insurance and then die later, it will only pay out $500,000 when you die since you have already received $500,000 from your TPD claim.
Pros
Lower premium.
Covered for lots of eventualities.
Convenient as only requires one premium payment.
Cons
Only one sum insured for the entire policy.
Less customisable.
Fewer companies to choose from.
Standalone cover
This is when you take out different types of insurance separately, so each has a separate sum insured and can be claimed separately.
You can get different cover types from different insurers, and it is generally more flexible.
Example: Someone who does not have a family might not want term life insurance but instead want income protection insurance and trauma insurance. They might take out a standalone policy for income protection insurance and then take out a different policy for standalone trauma insurance.
Pros
Easier to customise.
Wider selection of companies to choose from.
Cons
Can be more expensive than bundling.
Have to pay multiple premiums.
Why you can trust Finder's life insurance experts
We're free
You pay the same as buying directly from the life insurer. Better still, we regularly run exclusive deals that you won't find on any other site – plus, our tables make it easy to compare policies.
We're experts
Our team of life insurance experts have researched and rated dozens of policies as part of our Finder Awards and published 250+ guides to make it easier for you to compare.
We're independent
Unlike other comparison sites, we're not owned by an insurer. That means our opinions are our own and we work with lots of life insurance brands, making it easier for you to find a good deal.
We're here to help
Since 2016, we've helped 270,000+ people find life insurance by explaining your cover options, simply and clearly. We'll never ask for your number or email. We're here to help you make a decision.
Frequently asked questions
Term insurance pays out a lump sum to your loved ones if you are diagnosed with a terminal illness or pass away unexpectedly. It only covers a policyholder for a set amount of time, normally between 10 and 30 years, after which the policy expires.
Aside from death cover, the main types of life insurance are:
Trauma insurance. Pays a lump sum if you're diagnosed with a critical illness, such as cancer.
Income protection insurance. Pays a replacement income if you're temporarily unable to work due to illness or serious injury.
You usually have up to 30 days after your insurance begins to cancel and receive a full refund on any premiums you've paid. If you cancel after this time, you generally won't be refunded for the premiums you've already paid.
Sometimes you can access the money that you've accumulated. However, if you do that, you may have to surrender the coverage that your policy provides.
Yes. Many people have more than one life insurance policy. This is especially typical if you have life insurance inside your superannuation; you may decide to take out another policy that isn't in your super. Multiple life insurance policies
Most policies will cover all causes of death once the policy has been held for 12 months. If your death occurs within the first 12 months of holding the policy, then you are only covered for accidental deaths (check a policy's PDS for more on this).
Many life insurance policies cover suicide, but generally only after a specified waiting period, for example, 13 months. Does life insurance cover suicide
Yes. Generally, you can nominate up to 5 beneficiaries in your policy, and in general the benefit can be distributed as you wish.
Our research team compared 20 insurance brands and rated NobleOak the highest thanks to its competitively-priced premiums and wide range of added features and benefits.
Other providers that came out on strongly included Medibank, ahm and TAL.
It's important to remember that no single insurance brand works for everyone. You should carry out your own research to find out what brand works best for you.
James Martin was the insurance editor at Finder. He has written on a range of insurance and finance topics for over 7 years. James often shares his insurance expertise as a media spokesperson and has appeared on Prime 7 News, WIN News, Insurance News, 7NEWS and The Guardian. He holds a Tier 1 General Insurance (General Advice) certification and a Tier 1 Generic Knowledge certification, both of which meet the requirements of ASIC Regulatory Guide 146 (RG146).
Was your life insurance application denied? This article looks at the top reasons why your application might have been denied and what you can do to get the right cover.
finder's guide to choosing between stepped and level insurance premiums.
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