Compare and choose the right life insurance policy

Why is life insurance important?

It is important that you choose the right life insurance cover to adequately protect your loved ones from financial hardship, should you unexpectedly pass away and leave behind significant financial obligations to cover. Choosing the right life insurance won't bring you back, but it can give your family the financial security in the areas that matter.

What's the risk of not getting life insurance?

Whether it's just yourself and your partner, or if you have a family of youngsters, you will have people who are financially dependent on you. Many families experience great hardship after the main breadwinner has passed away and are left with a large chunk of financial responsibility. This could mean the family home having to be sold or your spouse having to take on extra work to manage the ongoing living expenses.

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The purchase of adequate life insurance need not be as big a hassle as many people think it is. A key reason for Australia's current underinsurance crisis is that people simply feel overwhelmed by the different types of cover available. This article offers some simple steps help you determine an adequate level of cover to protect you and your family.

1. Know what you need your life insurance cover for

Your personal circumstances will dictate both the types of cover you need and how much cover you need (based on the types of expenses you need to cover). Consider these scenarios:

  1. If you are single, the cover you need will be sufficient to pay your bills, any outstanding mortgage debt, personal debt and coverage for your funeral costs.
  2. If you are married and have children, you will need extra cover and at this point of time, you may have accumulated larger debts, either short-term or long-term.
  3. If you are the main income earner of the family, you will need to consider your families ongoing expenses.

Some common expenses that life insurance can help cover include;

  • Mortgage debt
  • Other personal debt - car loan, personal loan
  • Legal expenses that may arise following death
  • Funeral expenses
  • Education expenses
  • Home duties that policyholder managed
  • Everyday living expenses - food, clothing, transport, maintenance, entertainment

2. Consider the various types of cover

Life insurance helps your family once you die. There are however a range of other situations that you might want to cover to e.g. becoming disabled. This is where "living insurance" comes in. The three main types of living insurance are

  • Trauma insurance: Trauma insurance will provide a lump sum benefit payment if the policyholder suffers a medical condition covered under their policy. Some providers will offer cover for up to 50 different conditions including stroke, cancer or heart attack. The lump sum benefit can be used as the policyholder wishes, however it is generally used to cover costs of medical treatment and ongoing living costs as they are forced out of work.
  • TPD insurance: TPD insurance provides a lump sum or ongoing benefit if the insured suffers partial or total disablement and are unable to work to their full capacity or ever again. Each insurer will have different definitions for disablement so it is crucial that applicants are clear on when they will actually be eligible to claim.
  • Income protection insurance: Income protection is generally purchased separately to life cover and provides an ongoing benefit of 75% of the insureds income if they are not able to work as a result of illness or injury. Income cover can offer a range of additional benefits to cover rehabilitation and nursing costs to ensure recovery is as swift as possible. Some policies will provide more than 75% of the insureds income if this additional amount is contributed to their superannuation.

Need help with step 1 and 2? Use this needs tool below

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3. Consider your life stage

You will need to review your life insurance regularly in order to make any alterations than may be needed following different life stages. Some typical events that may lead you to reassess the amount of cover you have in place include;

  • Upgrade to a new home
  • Change in occupation
  • Birth of new child
  • Death of beneficiary
  • Remarriage

4. Think of the features that matter to you

What type of features do you need? This is important when speaking to an adviser or sorting through policies online. As a quick guide, think of what you need out of a policy:

  • One that let's you increase your cover amount as you get older without an additional medical assessment? Check for 'Guaranteed future insurability'
  • Flexibility to pause your premiums temporarily if you are struggling financially? Look for a 'Premium Freeze Feature'
  • A benefit that helps your family out with the financial planning process when you're gone? Ask whether there is a 'Financial planning benefit'

Learn more about life insurance features

5. Look at your life insurance premiums as being a fixed expense in your budget that is not negotiable

Never consider your life insurance is an item that you can get rid off when money becomes tight because you believe you can take it out again when your cash flow improves. It will always be more expensive the older you get and you may also undergo some health problems as you age that may make insurance harder for you to obtain at the standard premium price.

You wouldn't drop your house insurance or motor car insurance to free up your household income, so why should you even consider dropping your life insurance cover?

6. Consult an insurance consultant to help you find adequate cover

Speaking with an insurance adviser can help you find an insurance solution that closely matches your cover requirements. Insurance advisers can use their knowledge of the insurance market to;

  • Help you compare multiple policy options at once
  • Determine an adequate amount of cover
  • Design your policy to include any other suitable cover options
  • Find providers that will offer cover if you are potentially high risk
  • Hunt out premium discounts

Does paying more always mean I'll get a better policy?

Not always. A higher cost does not guarantee more features. In the example below, some features are only included in the cheaper costing policy and vice versa (some features are only available on the higher costing policy).

FeatureCheapest policy ($23.56)Most expensive policy ($31.80)
Cover amount$500,000$500,000
Funeral expenses $25,000$25,000
Interim cover $1,000,000$1,000,000
Guaranteed renewable YesYes
Accidental death benefit NoNo
Termina illness benefit YesYes
Financial planningbenenfit $5,000$5,000
Future insurability $200,000$250,000
Complimentary child insurance $10,000$0
Worldwide cover YesYes
Loyalty benefit NoYes
Benefit indexation YesYes
Premium waiver NoNo
Premium freeze option YesNo

Prices and features were taken from finder life insurance quote engine using a $500,000 life insurance policy for a 29 year old male non-smoker. Details were last checked as accurate in January 2018.

So how do I work out what's a better policy?

It's a matter of working out what features are important to you when deciding on cover. If you are unsure what they are, speak to a qualified life insurance adviser. Additionally, it’s wise to consider other factors such as a life insurance brand’s awards and satisfaction scores.

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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

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
Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .
Get a quote for up to $15 million in life insurance cover. Cover can be tailored to meet your personal needs.
Flexible cover options to suit your budget. New eligible customers can receive 25,000 Velocity Points. Ends 31 Mar. Min monthly premium and T&Cs apply.
No expiry age as long as premiums are paid
Receive a discount of 10% on life insurance as a Woolworths Rewards Member. T's and C's apply.
Get flexible life insurance up to the sum of $2,000,000.
Receive a 10% discount on the second person when two applications are submitted at the same time, and both policies are issued.
A simple life insurance product that can offer up to $1,500,000 in a lump sum payment on death or diagnosis of terminal illness.

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Richard Laycock

Richard is the insurance editor at He is on a mission to make insurance easier to understand.

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