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Is life insurance worth it?

Life insurance can offer peace of mind that your finances will be protected if a serious life event strikes. Ultimately, the decision rests on your financial position and individual circumstances.

For some people, getting life insurance 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.

5 reasons life insurance is worth it

one

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.

two

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.

three

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.

four

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.

five

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.
Life insurance expert Phil Thompson

Why it's important to consider life insurance

If you have someone who is relying on your income, then life insurance is particularly important. And not just kids. This can include elderly parents or a partner. No one is ever really prepared for life's harsh surprises, but insurance can help soften the blow.
— Phil Thompson, owner of Skye Wealth, a specialist life insurance advisory.

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:

Shield with tick life insurance icon

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

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

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

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.

Tombstone icon

Funeral insurance.

Pays a lump sum benefit to your family so they can cover the cost of your funeral after your death.

Personal accident insurance

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.

Compare life insurance brands and get a personalised quote

1 - 8 of 15
Name Product Maximum Cover Maximum Entry Age Terminal Illness Benefit Claims Acceptance Rate Average Claim Time Sum Insured
TAL Accelerated Protection Life Insurance
No set limit
73
Not stated
Data not available
1 months
$249,285 million
Our verdict: One of Australia's leading life insurers. Automatically includes child critical illness cover. Plus, it comes with a level premium option (e.g. costs remain similar as you get older).

⭐ Current offer: Get up to 15% off your TAL Life, Trauma or TPD insurance policy for life - if you have a Body Mass Index (BMI) between 19 and 28 at the time of your application. Offer T&Cs on insurer website apply.
Medibank Life Insurance
$2,500,000
70
$2,500,000
Data not available
Data not available
Data not available
Our verdict: Medibank offers a higher payout limit ($2.5 million) than 15 other providers. Get a 10% discount if you're already a Medibank Health Insurance member.

⭐ Current offer: Save 10% on your first year of Medibank Life Insurance when you apply by 1 July 2024. T&Cs apply.
NobleOak Life Insurance
Finder AwardBonus
NobleOak Life Insurance
$25,000,000
74
$25,000,000
96.90%
1.1 months
$24,483 million
Our verdict: Finder Life Insurance Award winner for the last 5 years in a row. Good value for money, simple application process and a high claims acceptance rate.

⭐ Current offer: Get two months free on all cover types apply by 14 June 2024. T&Cs apply.
RACWA Life Insurance
$25,000,000
74
$25,000,000
96.90%
1.1 months
$24,483 million
Our verdict: RAC’s maximum death cover limit of $25 million is one of the highest limits you’ll find, including $5 million in TPD insurance. You can get an online quote, but you’ll need to call RAC to get trauma cover. Benefit from added peace of mind with fully underwritten insurance. RAC is also WA-based but services all of Australia.

⭐ Current offer: Get two months free when you apply for two or more RAC Life Insurance covers by 30 June 2024. T&Cs apply.
ahm Life Insurance
$1,500,000
55
$1,500,000
Data not available
Data not available
Data not available
Our verdict: ahm offers a simple application process. You can be approved online or over the phone. There are no medical or blood tests needed.

⭐ Current offer: Get 10% off your first year of ahm Life Insurance when you apply by 1 July 2024. T&Cs apply.
AAMI Life Insurance
$1,500,000
65
$1,500,000
Data not available
3.1 months
$37,768 million
Our verdict: There’s flexibility with AAMI as you can add another adult to your cover, with a competitive limit of $1.5 million. Easy application process with no medical exams.

⭐ Current offer: Take out a new AAMI Life Insurance policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.
Suncorp Life Insurance
$1,500,000
65
$1,500,000
Data not available
3.1 months
$37,768 million
Our verdict: Competitive maximum cover limit of $1.5 million. Suncorp lets you change your cover amount by up to $100,000 after a big life event, such as having a baby.

⭐ Current offer: Take out a new Suncorp Life Insurance policy and get $100 eGift card after your first 4 months of cover. T&Cs apply. Ends June 30, 2024.
Real Family Life Cover
$1,000,000
64
$1,000,000
88.90%
2.4 months
$53,238 million
Our verdict: The application is simple; it can be done with 1 phone call and there are no medical exams. But households with larger debts may need more than a $1 million payout.

⭐ Current offer: Get back 10% of the premiums you’ve paid after 1 year.
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Why you can trust Finder's life insurance experts

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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

More guides on Finder

  • Do I need life insurance?

    Learn about the different types of life insurance available in Australia, and when you might need to take out cover.

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