No, you aren't legally obligated to take out life insurance when you buy a home. It's not like home insurance which you almost always need to have in place before you move in.
Taking out life insurance when you buy a home can offer financial security and be worthwhile, depending on your circumstances.
The main reason for buying life insurance is to make sure that your mortgage would be paid off (or at least partially paid off) if you died.
This is likely to be crucial for some people, but less so for others. For example, it could be really helpful if you've just bought your family home with your partner and they wouldn't be able to continue paying the mortgage without your income.
On the other hand, it may be less helpful if you're single – in which case the house would simply be sold. Or, if your partner is comfortable downsizing.
No, life insurance only pays out if you die or become terminally ill.
However, income protection insurance can help in this type of situation. If you get sick or injured and need to take time off work, it can pay you up to 75% of your monthly income. In some cases, it can also cover involuntary redundancy.
Another important type of life cover to consider is Total & Permanent Disability (TPD) insurance. TPD instance – which, in the case of NobleOak, has a benefit limit of up to $5 million – covers you if you get severely injured or sick. For example, if you become blind or paralysed after a car accident and become permanently disabled.
In these budget-conscious times especially, it can be hard to weigh up how much cover you need.
Expert Brenton Tong, managing director of Financial Spectrum, told Finder: "Term life cover is usually pretty cost-effective, so you can expect about $1 million of life insurance to cost you around $150–$300 per year if you're fit, in your 30s and a non-smoker.
"As you get older you can expect costs to start to increase. By the time you're in your 40s, this will increase to about $500 per year. Once you hit 50, prices will generally climb to levels that won't be sustainable."
Tong added: "It's always important to make sure that you're covered for sufficiently."
For life insurance, as a general guide you want at least the total of your home mortgage and, if you have children, 5–10 times your salary. The age of your children will matter because if they're just about to move out of home, you don't have as much time you need to look after them if a parent dies suddenly.
Brenton Tong
Financial planner
Finder's life insurance calculator can help you to figure out what you'd need to pay off your debts such as your mortgage and to meet ongoing expenses such as food and filling up the tank.
The quotes below show the average monthly cost of cover as part of our extensive research for the 2023 Finder Awards. Quotes were based on a (non-smoking) female office worker earning $80,000 per year, based in NSW, looking for $500,000 in cover.
Keep in mind, these quotes are indicative – the actual cost of life insurance varies a lot depending on personal factors including your age, health and smoking status.
| Brand | 30 years old | 40 years old | Apply |
|---|---|---|---|
 | $15 | $22 | Get quote |
 | $19 | $28 | More info |
 | $19 | $24 | Get quote |
 | $29 | $42 | More info |
 | $29 | $57 | Get quote |
 | $29 | $57 | More info |
 | $29 | $57 | Get quote |
 | $35 | $49 | Get quote |
 | $36 | $56 | More info |
 | $37 | $52 | Get quote |
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