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Term Life Insurance is a type of cover that provides a payment:
To your loved ones if you pass away during the 'term' of the policy (for example before the age of 90)
To you if you have been diagnosed with a terminal illness and are not expected to live for longer than 12 months
Receive an affordable quote for term life insurance
An adviser can help you find cover from trusted life insurance brands.
finder.com.au's comparison of term life insurance quotes
Below is a quick view of how much life insurance can cost you, per month.
Policy
Cover amount
Monthly premium*
MLC Insurance
$500,000
$25.58
ClearView LifeSolutions
$500,000
$25.77
AIA Priority Protection
$500,000
$30.13
AMP Flexible Lifetime Protection
$500,000
$35.55
*Prices are an estimate based on a 35 year old non-smoking male office worker. Quotes last checked on June 2017 and are subject to change. For a closer estimate, enter your details in the form above.
Term life insurance provides cover for your family and anyone else that is financially dependent on you in the event that you pass away or are diagnosed with a terminal illness during the 'term' of your cover or before what's known as the expiry age.
What happens at the end of my policy term for term cover?
There is no cash payout or 'surrender cash value' in term life insurance. You pay a premium to have cover in place and if the term ends or you cancel your policy, you do not receive payment.
A lump sum benefit payout. When you take out a term cover policy, you are paying for an agreed benefit amount which will be paid to your family when you die. The term life insurance benefit will be paid as a lump sum amount, so that your family can use the money to pay off debts such as the mortgage or credit cards, as well as use the money as an income to pay ongoing bills to maintain their lifestyle and goals, such as your children’s education.
Advance payment for terminal illness. If according to a medical practitioner you are expected to die within 12 months, your policy can pay out the benefit as an advance payment to help with final medical expenses.
Can be renewed each year. Most policies can be renewed until you reach the age of 99, however, you may not have to renew your policy after you retire, if you have a healthy retirement investment.
Few exclusions for when a benefit won't be paid. Most plans will have just one exclusion, where the policy won’t pay out if your death is the result of suicide in the first 13 months. Apart from that if you have been honest and detailed on your application, your family will usually be able to rely on a cash payout when you die. Obviously there are certain exclusions for when a benefit can be paid for injury and illness claims.
Additional options available. Since your death is not the only circumstance which could leave your family unable to rely on your income, and so you can add extras to your term life insurance policy such as total and permanent disability insurance and trauma insurance, which can pay a percentage of your income if you are unable to work because of an illness, injury or accident.
What are some drawbacks of term cover?
As with any insurance product, its tailored features can mean that term protection presents certain disadvantages in some circumstances, so make sure you are aware of:
No cash value. One reason that term life insurance is cheaper than whole of life insurance is that it doesn’t accumulate an investment portion. This means that your insurance policy does not accrue any cash value, so if you out live the term of your term insurance, and die after the term has expired, your beneficiaries don’t receive any cash out or death benefit. Therefore, if you survive your policy you don’t see any return on the premiums you have paid.
Regular renewals and rising costs. As a policy is only valid for the term you’ve chosen, when the policy expires at the end of that term you need to take out a new policy if you want to continue to be covered. However, at the end of the term you are older than you were when you first applied, and may have seen other health and lifestyle changes too, all of which can combine to make renewing your policy more expensive. Plus, term life insurance is not a set and forget insurance product, as you need to go through the application process again and again at the end of each term.
Your premium will reflect your lifestyle choices, Your premiums will be based on the level of risk you present to your insurer. If you smoke, engage in high-risk activities or work in a dangerous occupation, you can expect to pay more than others. You shouldn't take ever change who you are or your interests to save on your cover but their may be some changes to make to your health to benefit from a lower premium.
Is whole of life insurance no longer available in Australia?
Insurance companies in Australia no longer offer "whole of life" or universal life insurance in Australia. This type of cover was popular in the 1970s and 1980s but has now been replaced by term life insurance mainly due to whole of life insurance premiums being unable to keep pace with inflation and it being considered to be a poor form of long-term investment.
Do I need term life insurance in Australia?
Despite Australia being a developed country, as many as 95% families with children are underinsured, with around 40% of the population with no life insurance cover in place at all (Lifewise/Natwise, 2010; Comminsure, 2012). Most people are quick to insure their car or home before taking out life or income cover for themselves with 83% of Australians having car insurance in place. (AAMI, 2008).
Why is this the case? People argue that it is because the benefits of term life insurance are less tangible to something like car insurance, with others who choose to push the thought of actually needing life insurance to the back of their mind. When asked why they don't have life cover in place, many people will respond with one of the following:
"I don't really need it. Do a test and see if you have any needs that could be serviced by cover.
"Nothing will happen to me." While a sudden death isn't likely, think of what happens in that event.
"Life insurance is too expensive." There are ways to get cheap cover that allows you to make a small sacrifice for a greater peace of mind.
"It's just too complicated." Yes, it is a detailed product. However, it's easy to speak to an adviser to clear things up.
This will really depend on your own situation and what you would need to cover in the event of your death. Some key triggers that lead many Australians to take out cover or review their existing cover include buying a house, getting married and having their first child. These events may not apply to you but it is still worth considering the "living insurance" that provide a payment if you suffer a major illness or injury and do not pass away.
What is the age limit on Term life insurance?
Age limits for term life insurance varies between brands. The table below shows the maximum age of entry and expiry for term life insurance.
Insurer
Maximum Age to Take Out Cover
Maximum Expiry Age
AIA
75 (Age Next Birthday)
100 (Age Next Birthday)
Onepath
59 (Age Next Birthday)
100 (Age Next Birthday)
Comminsure
69 (Age Next Birthday)
100 (Age Next Birthday)
TAL
75 (Age Next Birthday)
100 (Age Next Birthday)
Clearview
75 (Age Next Birthday)
100 (Age Next Birthday)
Asteron Life
75 (Age Next Birthday)
100 (Age Next Birthday)
The maximum entry age may also change based on the type of premium you choose and how much cover you apply for. Make sure you know these restrictions before applying for cover.
What expenses can term life insurance cover?
Replacing an income for your partner or your family that would be lost if you were to die
Cover mortgage or rent payments
Cover your child's education
Cover other personal debt i.e. car loan
Childcare if your spouse had to return to work
Funeral costs and financial planning
Taxes
Everyday living expenses
How much is it going to cost me?
The amount you pay for cover will depend on a number of factors including;
Your age - the older you are the more you will pay
Your occupation - higher risk occupation may mean you pay a higher premium
Whether you smoke - smokers are considered higher risk and will pay a higher premium
Gender - rates vary between genders at different ages
Pre-existing medical conditions - will depend on the nature of condition and current treatment
Term life insurance can also be combined with other types of "living insurance" TPD Insurance and Trauma Insurance - these provide a lump sum payment if you become disabled or suffer a trauma event such as stroke, cancer or heart attack.
Don't I already have cover in my superannuation?
Most super funds will provide a very basic level of cover life insurance to members. This is usually only a portion of what will actually be required to cover all of your debts/ongoing expenses of your family if you were to pass away. It is possible to either increase or decrease the cover in your superannuation.
Here are some benefits and drawbacks of life insurance through superannuation you might want to consider;
Benefits
Generally cheaper as cover is bought in bulk
Premiums may be tax-deductible
Premium is not taken from take home earnings
Premiums automatically deducted
Reduced health checks during application
Drawbacks
Types of cover available is limited (No Trauma)
Generally a reduced level of cover available
Benefit payment can be drawn out as funds are paid to trustee first
Benefit payment may be taxed
Reduced range of benefits
Cover may stop if you change funds
The decision of whether or not to fund your life insurance through superannuation is not always straightforward. You may wish to speak with an insurance consultant to get a better idea of what is best for your situation.
Have You Considered a Life Insurance Superannuation Rollover?
Many life insurance companies now offer whats known as a superannuation rollover. This lets you apply for a policy with a life insurance company and still fund the policy with either the life insurance companies super fund or the superannuation fund you currently have.
This means you can continue funding your cover through your superannuation but access cover from a life insurance company that may be more suitable to your situation.
Bit confusing? Learn more about life insurance superannuation rollovers
Is term life insurance tax deductible?
Type
Taxed?
Life insurance outside of superannuation
Premiums are not tax-deductible
Life insurance inside of superannuation
May be tax-deductible if self-employed
Life insurance outside of superannuation benefit
Benefit payment is provided tax-free
Life insurance inside superannuation benefit
Benefit may be subject to tax
Can I get cover without having to do a medical exam?
This will depend on your own situation and if you have had any medical complications in the past. There has been significant changes in recent years to how applicants are assessed and insurers are much more willing to tailor cover to people that have a pre-existing condition.
Most life insurance companies will require you complete a short medical questionnaire when applying for cover. If you meet their entry requirements, you will usually be able to apply for cover without having to undertake a medical exam or provide details of your medical history.
Most direct insurance brands will allow you to apply for cover entirely online or over the phone if you meet these entry requirements.
You should take out enough to cover expected final expenses;
Medical bills
Estate planning costs
Funeral costs
Plus the living expenses for your dependents
Loan repayments for the house and car
Credit card repayments
Any other ongoing expenses in your household
Term life insurance is an ideal option to add extra coverage and peace of mind at times of high financial commitment. With this in mind it's worth considering;
When your mortgage will be at its greatest
How long you want to cover your spouse for in the event of your death
When your children’s needs will be the highest
When your household income may be impacted because one parent is staying at home or working less to take care of the children
Most insurers will require details of your;
Health
Income
Occupation
Residency
Lifestyle/hobbies
Travel information
This helps the insurer assess whether you are eligible for cover, any exclusions they will need to apply to the policy and how much you should pay for cover
The cooling off period is a period at the start of your policy (usually of about 30 days) where you can cancel your policy and receive a refund of any payment that has been made.
There are a number of extra features you can add to your term life insurance policy to tailor it to your needs, and so you may want to consider the:
Accidental death benefit: Will pay an additional amount above your coverage amount if your death is the result of an accident.
Children’s term life insurance: Can pay a death benefit for each of your children covered under your policy in the event of their death. You can usually add insurance for your child for around $10,000 and $20,000, based on their age and other eligibility requirements.
Total permanent disablement: Will make sure your premiums are paid for you if you become totally disabled. There are often age and coverage restrictions which apply.
Accelerated death benefit: Will make an advance payment of part of your benefit amount if you are diagnosed with a terminal illness.
Cover is generally available for;
Australian citizens
Permanent residents of Australia
Most insurers will allow you to apply for life insurance up to age 75 with some insurers offering cover to age 80
At the end of the term you have chosen for your cover you will have the option to renew your policy on an annual basis without being asked any medical or lifestyle questions, or undergoing a medical test. However, if you choose this option you may be paying higher premiums as the insurer cannot confirm your level of risk.
In other cases a term life insurance policy may have an option to roll over into a whole of life policy, which can then cover you until retirement or your death. Typically you will have a set period of time in which to convert your policy – dictated by each different insurer – and you won’t have to provide any new information about your health or lifestyle if you keep the benefits of the policy the same.
Premiums will increase with age under a stepped premium arrangement. Level premiums will start low but increase overtime.
Your insurer will generally give you the option to pay your premiums monthly, quarterly, six monthly or yearly. Make sure you check whether there is a loading added for paying your premiums in instalments throughout the year, or for the payment method you prefer – such as credit card or BPAY.
During the application process you can change and adjust the variables of your policy until you are happy with the final product. During the term of your insurance policy you may have the opportunity to change your coverage amount or your term of coverage at specific intervals during the term, often every two years.
Yes. Most insurers offer Guaranteed Future Insurability which allows you to increase the level of cover of your policy without having to provide any further medical evidence or proof of insurability following certain personal events including;
Marriage
Divorce
Death of spouse
Birth or adoption of child
Your child begins tertiary education
You purchase a new home and take out a mortgage
If you want to increase the level of cover of your policy without a personal event having occurred, you may be required to undertake additional medical tests
Yes. if you wish to reduce the amount that you are covered for, you can contact your insurer to request it is reduced.
If you purchased cover through your super fund, you will have to contact them directly.
Yes. You can organise to remove cover features at a later date by contacting your insurer.
Yes. You will need to submit a smoker application form to your insurer and provide additional medical underwriting.
Yes. You can update your beneficiaries by contacting your insurer and add/remove those listed on your policy.
It’s worth reviewing your policy every 12 month to account for any changes to your situation.
Apply and receive a preliminary quote
Term life insurance can be a quick and easy way to protect your family at some of the most vulnerable and expensive times of your lives, so take the time to consider this added protection for your loved ones. Enter your details in the form above if you would like to start comparing policies and get quotes with an insurance consultant. There is absolutely no obligation to sign up for a policy when making an enquiry.
Richard Laycock is Finder’s insights editor after spending the last five years writing and editing articles about insurance. His musings can be found across the web including on MoneyMag, Yahoo Finance and Travel Weekly. When he’s not doing deep dives on data, he is testing the quality of cocktails in his newfound home of New York. Richard studied Media at Macquarie University and The Missouri School of Journalism and has a Tier 1 Certification in General Advice for Life Insurance.
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