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
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.
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.
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.
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.
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.
"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."
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:
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.
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.
Pays a lump sum benefit if you're diagnosed with a specific medical condition, such as major head trauma, stroke or heart attack.
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.
Funeral insurance.
Pays a lump sum benefit to your family so they can cover the cost of your funeral after your death.
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.
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Finder Score - Life Insurance
Life Insurance is a little complicated and a lot overwhelming. That's why we made the Finder Score, to make it easier to compare Life Insurance products against each other. Our experts analysed over 30 products and gave each one a score between 1 and 10.
But a higher score doesn't always mean a product is better for you. Your situation is unique, so your policy choice will be too. Don't think of Finder Score as the final word, but as a good place to start your life insurance comparison.
Read full Finder Score methodology
Why compare life insurance with Finder?
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You pay the same price as buying directly from the life insurer.
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We're not owned by an insurer (unlike other comparison sites).
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We've done 100+ hours of policy research to help you understand what you're comparing.
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