Life Insurance Vs. Health Insurance

Do I need life insurance if I already have health insurance?

Many individuals who already have health insurance either through Medicare or with a private insurer wonder if there is any real need to consider taking out additional life cover, with 17% of Australians believing that health and life insurance both provide similar protection, according to a recent survey by TAL Australia (Elsworth, 2013). Fact is,

Health insurance covers the short term

Health Insurance provides cover for your immediate medical and hospital expenses.

Life Insurance covers the long term

Life insurance can offer a significant payment in the event of a debilitating illness or injury to cover:

1. Long term expenses (that aren't covered by health insurance)

  • Ongoing medical expenses
  • Hiring a caretaker
  • Modifications to your home
  • Recovery costs
2. Long term financial goals

  • Paying for your child's education
  • Buying a house in the future or paying off your morgage
  • Controlling your credit card debt
  • Being able to retire by a certain age

I thought life insurance only pays out when the policyholder dies?

In addition death cover, life insurance policies often provide the following options:

  • Critical illness or trauma insurance. This type of insurance pays out a lump sum incase you develop a serious illness or injury defined by the policy.
  • Total and permanent disability insurance. This type of insurance will pay out in the event of an injury or illness that stops you from working permanently.

Start planning ahead with the right life insurance

Please enter your full name
Please enter a valid email address
It's important to give us a valid phone number
Date of Birth
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.
By submitting this form, you agree to the privacy policy
Get quotes

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
No expiry age as long as premiums are paid
First month FREE when you take out Real Family Life Cover. Available for a limited time (T&Cs apply).
Choice of cover options and flexible premiums to suit your budget. No lock-in contracts and fast application.

No expiry age as long as premiums are paid
Cover up to $1.5 million with Guardian Life Insurance.
Protect your family with up to $15 million in cover. Plus, get your first month free. T&C's apply.
Receive a 10% discount on the second person when two applications are submitted at the same time, and both policies are issued.
Tailored life insurance so you know what you're covered for upfront. Take out a policy and get a $100 bonus gift after holding cover for 2 months. T&Cs apply. Ends 31 March 2019.
No expiry age as long as premiums are paid
Receive one month's premiums off every year if you pay annually upfront. T’s and C’s apply.

Compare up to 4 providers

Life Insurance vs Health Insurance

Life insurance (with critical illness benefits) can provides a lump sum benefit in the event that the insured suffers a trauma condition such as stroke, cancer or heart attack. While health insurance can provide assistance in covering some medical and hospital expenses, life insurance will help cover financial obligations that one may face after being forced out of work due to their condition. This could include;

Insurance typeEquipment for rehabilitationNursing care after initial treatmentModifications to the home or carLiving costs and debts
Public health care (Medicare)
  • No
  • No
  • No
  • No
Private health care
  • No
  • No
  • No
  • No
Life insurance
  • Yes
  • Yes
  • Yes
  • Yes

What does government health care (Medicare) provide?

The Australian Government health insurance scheme known as Medicare provides a basic level of health insurance to give Australians affordable health cover and access to a range of health services. Health care ensures that the population receives free or subsidised treatment from medical practitioners and have access to a high proportion of prescription medicines at an affordable price.

How is Medicare Paid For?

Under the Medicare Levy Act of 1986, Australian residents are required to pay a levy based on their taxable income each year. This levy is 1.5% of their taxable income with non-residents, sole parents and families earning less than $29,207 not required to pay the levy.

Higher income earning individuals and families that do not have private health cover are required to pay an additional surcharge of 1% of their taxable income (Taxable income of $50,000 for single people and $100,000 for families).

What benefits are provided under health care?

Medicare will provide a minimum level of hospital and medical treatment to Australians eligible to receive cover. Health care will provide hospital benefits but it will be dependent on whether or not the individual is a public or private patient.

  • Public patients. If the person is admitted as a public patient to a public hospital they will be treated by specialists that are available and will not be charged for the service provided.
  • Private patients. If someone chooses to be admitted to a hospital as a private patient to have their choice of specialists, the extra costs for accommodation and medicines will need to be met. Medicare will cover the first 75% but the remaining 25% will need to be paid for either out of the patient’s own pocket or out of their private health cover.

What benefits are not covered under medicare?

  • Medical examinations for life insurance underwriting
  • Ambulance use
  • Cosmetic surgery
  • Treatment covered under third party insurance or workers compensation
  • Overseas medical expenses
  • Psychology services

What does private health care provider?

Depending on the type of private cover the policy owner has, it is possible to cover all of the costs associated with being a private patient in a private hospital with private health cover. Some of these costs include;

  • Dental treatment
  • Home nursing
  • Optical treatment
  • Hospital expenses
  • Ambulance services
  • Overseas medical costs
  • Optical treatment
  • Physiotherapy treatment
  • Chiropractic treatment
  • Medical expenses not covered under MediCare

There are different levels types of private health cover available, each offering different levels of cover. Comprehensive plans will cover all of the medical costs with others only covering select expenses.

Australians who have paid premiums for necessary private health cover have been able to claim a tax rebate of 30% of premiums paid from January 1 1999. Regardless of their level of income. The policy must be held in a registered fund and the policyholder must be eligible to claim Medicare.

Learn more about private health insurance

What does life insurance provide?

Life Insurance provides a lump sum benefit upon a policy owner's death or if diagnosed with a terminal illness and are not expected to live for a period longer than 12 months. This lump-sum benefit ensures that the policy owner is able to meet their financial obligations and not leave any financial burden to their friends or family.

Some policies will feature Final Expenses Benefit, to provide an advancement of a portion of the sum-insured to cover the immediate costs following death such as funeral or financial planning.

What about for injuries and illnesses?

Critical illness or trauma insurance can provide you with a lump sum payment in the event of a serious injury or illness to help you deal with the ongoing cost not covered by healthcare.

Income protection insurance and health insurance

Income protection cover provides an ongoing monthly benefit of 75% of the insured’s income to help meet their financial obligations if they are forced to take time out of work due to serious illness or injury. This benefit can be paid in addition to other benefits to cover professional nursing care and costs of rehabilitation.

Similarly to Trauma Cover, the real benefit of Income Cover over Health Insurance is in its use of covering the ongoing financial obligations that one faces if forced out of work. While Health Cover will cover immediate hospital and medical expenses, it will not provide support for various financial obligations i.e. mortgage, school fees, food, rent, clothing.

Compare life insurance quotes

Richard Laycock

Richard is the Insurance Editor at Finder, wrangling insurance product disclosure statements for the better part of five years. His musings on insurance can be found the web including on Yahoo Finance, Travel Weekly and Dynamic Business. When he’s not helping Aussies make sense of insurance fine print, he is testing the quality of cocktails in his new found home of New York. Richard studied Media at Macquarie University and The Missouri School of Journalism and has a Tier 1 certification in General Advice for Life Insurance.

Was this content helpful to you? No  Yes

Related Posts

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Ask a question
Go to site