Life insurance for new parents and young families

Australians usually get life insurance when starting a family.

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Becoming a parent for the first time is one of life’s great joys, but it also brings with it increased responsibilities, which can include:

  • A mortgage and outstanding debts
  • The cost of raising your child
  • Rent

Life insurance enables you to take care of these responsibilities if a death or serious illness or injury happens and you can no longer provide for your loved ones. It's why, for many Australians, having a child is a trigger to buy life insurance.

Case Study:

How much does it cost to raise children in Australia?

As any parent will tell you, a lot. Data from the Suncorp Bank Cost of Kids Report revealed that in 2016, the average cost of raising a child to 17 years old was over $297,600.

Get life insurance quotes from these direct brands

Updated January 27th, 2020
Name Product Maximum Cover Maximum Entry Age Minimum Sum Insured Expiry Age
Real Family Life Cover
No expiry age as long as premiums are paid
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .
NobleOak Life Insurance
Get your first month free. T&C’s apply. Offer ends 27 February 2020.
Zurich Ezicover Life Insurance
Get your first month free.
Medibank Life Insurance
No expiry age as long as premiums are paid
10% discount for Medibank health members.
ahm Life Insurance
No expiry age as long as premiums are paid
Get life cover up to $1.5 million. Plus, ahm health members can save 10% off premiums.
AAMI Life Insurance
Get life cover up to $1 million.
Guardian Life Insurance
No expiry age as long as premiums are paid
Cover up to $1.5 million with Guardian Life Insurance.

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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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Smiling mother, father and baby

New parents: How does life insurance work?

Life insurance generally pays out your family if you die but it also pays out for a variety of circumstances, such as an injury. There are several types of cover you might like to consider for your growing family:

  • Death cover. Term life insurance provides a lump sum benefit if you die or are diagnosed with a terminal illness. This ensures that your death doesn't place a huge financial burden on your family, giving them the freedom to grieve and continue living their lives without having to worry about money.
  • Total and permanent disability (TPD) insurance. TPD insurance provides a lump sum benefit when you suffer a total and permanent disability and are unable to return to work. You could use the benefit to pay off the mortgage, cover medical bills and help your family maintain their current standard of living.
  • Trauma insurance. Sometimes also known as critical illness insurance, trauma insurance is designed to provide cover when you suffer a serious illness or injury such as a heart attack, stroke, severe burns or major head trauma. It provides a lump sum that can be used however you like, for example, to hire someone to help out at home and take the pressure off your partner, or to replace lost income while you're unable to work.
  • Personal accident insurance. Commonly referred to as accidental injury insurance, personal accident cover provides a lump sum benefit when you're injured as a result of an accident. The more serious the injury, the higher the benefit you'll receive and you can use the funds to pay your medical bills and replace lost income.
  • Income protection insurance. Income protection insurance is designed to help you continue providing for your young family while illness or injury stops you from working. It pays an ongoing monthly benefit to replace 75% of your income, allowing you to keep paying the mortgage and other bills while you concentrate on your recovery.

How do you decide what your family needs?

There are several factors you need to take into account when searching for the right life insurance policy for your young family.

Understand your needs

Think about what type of protection your family needs and what concerns you. For example, do you have a large mortgage that needs to be paid for if you die unexpectedly (life insurance)? Or perhaps you're concerned about replacing your income while illness or injury keep you out of the workforce (income protection).

Choose your cover amount

Calculate how much life insurance cover your family needs. Think about how your loved ones would cope if you could no longer rely on your income.

Use an adviser if you need help

Life insurance can be confusing and as a new parent you may not have the time on your hands to understand all the ins and outs of different policies. To ensure that you end up with the right cover, it's worth using the help of an adviser.

Think about the future

In five years you could have another child and perhaps take out another mortgage. That's why you should look for a policy that lets you increase your cover in the future without doing another medical exam.

How much will it cost?

There are several factors that affect the cost of life insurance, including:

  • The type of cover you choose. Death, TPD, trauma, income protection and personal accident insurance are all priced differently.
  • The level of cover you select. The higher your level of cover, the more you'll need to pay.
  • Your age. As a general rule, the older you are, the more your cover will cost.
  • Your gender. Cover is usually cheaper for women than men.
  • Your health. The better your overall health, the less you'll need to pay for cover.
  • Your smoking status. Smoking is associated with a long list of health problems, so regular smokers have higher life insurance premiums.
  • Your hobbies and pastimes. Love scuba diving, rock climbing or participating in other risky pursuits? You can expect to pay more for cover.

Tip: Keep your costs down

A good way to ensure your life insurance is affordable is to review it regularly as your situation changes. For instance, as your child gets older and you pay off more of your mortgage, you probably need less cover. This means you can decrease your premium by insuring yourself for less.

Get a cost estimate today

Do both parents need cover?

Whether or not you and your partner both need cover really depends on your personal situation. If both parents earn an income, then protecting those incomes is definitely worth considering.

Stay-at-home parents can also benefit from cover

A common mistake many new families make is to assume that if only one partner is responsible for earning the family’s income, that person is the only one that needs life insurance.

While this may be true for some families, it’s certainly not always the case. Although a spouse who works in the home may not earn an income, they still perform a long list of essential tasks in and around the home.

If they were to die unexpectedly or suffer a serious health problem and be unable to perform their normal role, their partner may need to take time off work to look after the kids, do the school run, maintain the home and do a number of other important jobs. This would in turn have an impact on their own ability to earn an income for the family, or in other situations the surviving spouse could be left with extensive childcare costs as they try to juggle work and family life.

Carefully consider your family situation and cover needs before deciding whether both parents need life insurance cover.

Naming beneficiaries

When you buy life insurance that provides death cover, you’ll need to name a beneficiary to receive the policy benefit when you die. For most people, this means their spouse or partner.

Should we name our children as beneficiaries?

If you decide to nominate a young child as a beneficiary, they will be entitled to access the life insurance benefit when they reach 18 years old. This may be too young an age for them to properly and sensibly manage the money they receive, so another option is to set up a trust to hold the proceeds from the policy for your children. Then when they reach a suitable age, your beneficiaries can receive the funds through the trust.

Seek independent legal advice for more information on the best way to structure your life insurance benefit payment.

glowless (1)Life insurance from the perspective of a full-time mum

With so many different life insurance policies available in Australia, finding the right cover with features to match your situation is by no means an easy task. We had a chat with a full-time mum, blogger, writer and freelance makeup artist, “Glowless”, the creator of, to tackle some of the biggest issues/questions facing Australians looking to take out life cover.

Do you have life insurance?
I don’t actually have life insurance but my husband does. We considered that, should something tragic happen to me, he would be able to financially support himself and our son whereas if it was the other way around I would not be able to.
Is it confusing to know what you would actually be covered for and when a payout would be received?
I find any type of insurance confusing! There seems to be so much fine print that you have to study with a fine tooth comb before signing on the dotted line… but that’s life these days so take a magnifying glass and you’ll be fine.
Do you feel life insurance is a topic most people try to avoid?
Death is still taboo for many people, but luckily I come from a family who understand it’s just a natural part of the life cycle. It’s why we’ve all discussed organ donation, life insurance and wills.
There has been a belief that life insurance companies neglect the female buyer when advertising their products. Would you agree with this?
I can only assume on this, that any neglect of the female buyer would be because the self-view of the women. We tend to, in our at times martyr-ish ways, not believe we’re worth much financially – although when you start putting a price tag on a full-time nanny, cook, cleaner, teacher, mediator, etc, it certainly adds up!
Would you ever consider changing your current policy to find a more suitable policy at a more competitive price?
We’re lucky enough that my husband works for a large company that has brokered a reduced rate for all employees for all sorts of insurance, so we’ve been unable to find anything cheaper!

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