Life Insurance Vs. Health Insurance

Should I consider some form of 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 provides cover for medical and hospital expenses.
  • Different types of life insurance provide cover for ongoing financial obligations when an illness or injury occurs i.e. mortgage, credit card debt, funeral costs

What types of life insurance can be used to cover the costs of illness and jury?

Types of life insurance to consider:

  • Critical illness or trauma insurance. This type of insurance pays out a lump sum in case of 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 again.

Compare life insurance policies to cover what health insurance can't

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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.
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Compare Life insurance quotes from these direct brands

Rates last updated December 10th, 2016
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Choice of cover options and flexible premiums to suit budget. No lock-in contracts and fast application. $1,500,000 65 30 Get quoteMore info
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Receive up to $1,500,000 in life cover with American Express Term Life Insurance issues by Zurich. $1,000,000 69 30 Get quoteMore info
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Save 25% on NobleOak life insurance and pay no premium in the first month. $15,000,000 69 30 Get quoteMore info
Life Insurance
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Get flexible life insurance up to the sum of $2,000,000. $2,000,000 59 21 Get quoteMore info
Ezicover Life Insurance
Ezicover Life Insurance
Get up to $1.5 million in life cover. 10% discount available on a second life insurance policy when two policies are issued at the same time. $1,500,000 69 30 Get quoteMore info

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.


What can critical illness insurance cover that health insurance won't?

Critical Illness Insurance 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
Critical illnesses
  • Yes
  • Yes
  • Yes
  • Yes

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.

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Richard Laycock

Richard is the senior insurance writer at finder.com.au and is on a mission to make insurance easier to understand.

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