Death is one of life’s heaviest moments. But like life, it doesn’t last. Term life insurance helps your family move past the hard times.
If you die, there's not only an emotional but often serious financial burdens that fall on your loved ones. Your mortgage, debts and bills won’t automatically go away.
Term life insurance: A safety umbrella
Term Life Insurance gives you or your family a payout if you:
- Die within the ‘term’ of the policy (e.g. before 99 years old)
- Get diagnosed with a terminal illness with a life expectancy of under 12 months.
It won’t stop the rain, but it will give your loved ones some cover till the storm has passed.
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*|
|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.
What's in this guide?
What is term life insurance?
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.
Key benefits of term life insurance
- 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.
Can I bundle term life with other types of cover?
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. This guide will help you determine if you even need term life insurance and what steps you can take to help you get quality cover at the right price. If you are ready to receive a quote for cover, simply enter your details in the form below.
People argue that it is because the benefits of term life insurance are less tangible to something like car insurance
Common doubts with term life insurance answered
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.
- “It’s only for families with kids.” Not true, there are options for couples as well. Singles can take advantage of products like income protection and TPD.
When is a good time to take out cover?
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
- Everyday living expenses
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;
- 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
- 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?
|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|
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
- Don't buy the first term life insurance policy offered to you: Shop around a bit have a good look at what's available. Check out any testimonials you find online and when you get down to business make sure you thoroughly read the terms and conditions.
- Get an idea of how much cover you actually need...do you already have some other cover in place that you can fall back on or assets that could be sold in the event of your death?
- Quit smoking for good: This might sound a bit drastic but it works two ways. If you haven't smoked for at least 12 months your premium payments will be much lower than they would have been if you had continued smoking. The insurance industry work on statistics and if they feel they have to charge you a lot more before they'll insure you because you're a smoker, don't you feel that's a good enough reason in itself to give it up.
- Keep yourself fit and healthy: Life insurance is all about how long the insurance company thinks you're going to live. If you're seen to be knocking on deaths door you'll have to pay a substantial amount before you'll get any cover at all, you might even be declined cover, The less risk you pose to the insurance company the less you'll have to pay for the cover.
- Buy your cover while still young: The longer you put off buying life insurance the more you'll have to pay. Age is as important to an insurance company as is your health and lifestyle and the older you get the more expensive the cover will be.
- Joint life cover: Why not include your partner/spouse on your term life insurance policy? Not only will the both of you be covered, but you will also be eligible for discounts on your premiums.
Getting cheap cover? Here are some traps to watch out for
- Price will often reflect quality of cover...know exactly what you will receive in a claim
- Beware of cover rammed with exclusions of when a claim will be paid for death
- Policies that are extremely inflexible when it comes to adjusting your level of cover and features
- Can you trust the insurer? The last thing you want is a nightmare at claim time because your insurer has gone bankrupt
Term life insurance rate table by age
Looking for an example of what you can expect to pay? Check out the table below for an example of annual premium rates from four Australian brand;
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.Back to top
So is whole 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.
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
How do I compare policies?
Ready to start comparing policies? Here are some key things to look out for.
- Compare multiple policies, but do not rely solely on price: When assessing different term life policies and comparing the premiums rates for each cover, it is important to be fair in your judgement. The rates on offer should not be the only factor to consider when making your purchase decision. Some term life insurance policy rates may appear to be more affordable, however, they may only come with a basic level of built-in features and benefits.
- Check out the extras that are available: Another factor that will affect your term life insurance rates is your choice of additional features. Make sure that you assess and match your needs carefully with the additional options in place. The last thing you want is to be paying a higher premium for features you don't even need.
- Choice of premium structure - stepped, level premiums or hybrid: Your term life insurance premium rates will vary depending on the premium structure that you have chosen. Stepped premiums are very affordable at the start of your policy, however, they will increase overtime as you get older. Level premiums stay at a specific rate and will not change regardless of your age.
- Ability to bundle cover? Find out if it is possible to bundle your term life cover with other types of insurance i.e. Trauma or TPD. Does this bring a saving?
Some questions to consider when comparing cover
- What sacrifices can I make to afford insurance?
- Who is financially dependent on me?
- Is this a reputable provider?
- How much cover do I need?
- How long should I take out cover for?
- How much money do I need for retirement?
- What are the terms and conditions?
Frequently asked questions
How will speaking with an adviser help me get low cost term life insurance?
Speaking to an insurance adviser will provide you with the assistance that you may need to find affordable cover that suits your personal circumstance. An insurance provider has the expertise and knowledge of the market to be able to find competitively priced policy options that are tailored to your needs. In addition, if you are considered to carry an additional level of risk due to certain lifestyle factors, an adviser can help you find an insurer willing to provide cover for specialist risk.
Unlike a financial planner’s service, consultation with an insurance adviser is free-of-charge and you have no commitment to sign up for a policy right away. This grants you the flexibility to take your time to find an appropriate policy option and get a clear understanding of the terms and conditions prior to application.
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.