Types of life insurance in Australia

Life insurance is there for you in life emergencies. Because there's more than one way in which your life can change unexpectedly, insurers offer specific policies for various different scenarios and needs. We've broken down the main ones down for you below.

Compare the 6 main types of life insurance in Australia

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Name	Product	Maximum cover	Maximum Entry Age	Fully Underwritten?	Terminal Illness Benefit	Optional Extras
NobleOak Life Insurance Finder Award		$15,000,000	69		$3,000,000	TPD cover, Trauma cover	Get your one month free when you buy NobleOak Life Insurance policy. Offer ends 31 October 2021. T&C's apply.	Get Quote View details	Compare	loading Fetching your data...
Real Family Life Cover		$1,000,000	64		$1,000,000	TPD cover, Trauma cover	Get a refund of 10% of the premiums you've paid (in the first 12 months) with The Real Reward™ .	Get Quote View details	Compare	loading Fetching your data...
Zurich Ezicover Life Insurance		$1,500,000	69		$1,500,000	No optional	Get your first month free and a 10% discount by taking out a second life insurance policy (discount applies to the second policy). Customers who suffer a serious side effect from an approved COVID vaccination may be eligible for a $50,000 one-off payment. T&C’s apply.	Get Quote View details	Compare	loading Fetching your data...
Medibank Life Insurance		$2,500,000	70		$2,500,000	TPD cover, Trauma cover	Medibank health members save 10% on premiums every year. T&Cs apply.	Get Quote View details	Compare	loading Fetching your data...
RAC Life Insurance (Only available in Western Australia)		$25,000,000	69		$25,000,000	TPD cover, Trauma cover	When you purchase RAC Life Insurance, WA residents receive complimentary RAC membership which includes access to discounts on fuel, savings on shopping, entertainment and more. T&Cs at rac.com.au.	Get Quote View details	Compare	loading Fetching your data...

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Level of Protection UnsureNone$100,000$200,000$300,000$400,000$500,000$600,000$700,000$800,000$900,000$1,000,000$1,250,000$1,500,000$1,750,000$2,000,000

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_{The following calculation is an estimate based on your answers. There are limitations. You should always speak to an adviser to get a clearer understanding of your needs and the right mix of insurance for you.}

Term life insurance

What is it?

Term life insurance provides a lump sum payment when you die or are diagnosed with a terminal illness during the term of the policy. You can choose the sum insured (up to a limit imposed by the insurer) for your policy, remembering that the premiums will rise along with your level of cover,.

You have the freedom to nominate the beneficiaries who will receive the life insurance payout and use this type of cover to provide financial support for your loved ones when you’re no longer around.

Term life insurance is sometimes also referred to as life cover or death cover.

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Total and permanent disablement (TPD) insurance

What is it?

TPD insurance provides a lump sum payment if you suffer a serious illness or injury that leads to total and permanent disablement. In order for a claim to be paid, you will need to be unable to be likely to ever return to work again.

Learn more about TPD cover

Trauma insurance

What is it?

Trauma insurance is designed to provide cover when you suffer from a serious illness or health condition. When you experienced a specified trauma event, for example heart attack, cancer or stroke, trauma insurance provides a lump sum benefit. This type of cover is sometimes also referred to as critical illness insurance.

Learn more about trauma insurance

Income protection insurance

What is it?

Income protection insurance pays an ongoing monthly benefit to replace your income when you are ill or injured and unable to work. Most policies will replace up to 75% of your regular income and may also offer cover for involuntary unemployment.

You also have the freedom to choose:

• The waiting period. This is the amount of time between when you suffer your illness or injury and when you start receiving benefits.
• The benefit period. This is the maximum length of time for which your policy will pay an ongoing benefit.

Compare income protection insurance

Personal accident insurance

What is it?

Personal accident insurance, which is sometimes also referred to as accidental injury insurance, provides a lump sum payment when you are injured as a result of an accident. It covers injuries such as dislocations, fractures, severe burns and loss of sight or limbs, with different benefits payable depending on the type of injury.

It’s worth noting that personal accident insurance should not be confused with income protection insurance, which pays a monthly benefit when you are unable to work due to injury or illness.

Get a quote for personal accident insurance

Funeral insurance

What is it?

Funeral insurance provides a lump sum payment to your loved ones or beneficiaries when you pass away. This benefit can be used to cover the cost of your funeral and meet any other immediate expenses that may arise.

It’s quick and easy to apply for funeral insurance cover, with no medical tests required and guaranteed acceptance usually provided to applicants under 70 years of age.

Compare funeral insurance

Business expenses insurance

What is it?

Business expenses insurance provides an ongoing monthly benefit to help keep your business running when you suffer an illness or injury. You can use the benefits you receive to cover business overheads such as staff salaries, loan repayments, rental payments for your business premises and phone and utility bills.

Key person insurance

What is it?

Key person insurance, sometimes also referred to as key man insurance, is a type of life insurance policy taken out on a key person in a business, such as a director, sales manager or business owner. It provides a lump sum benefit when the life insured dies or is unable to work due to illness and injury, allowing you to cover the cost of finding and training a replacement, settling outstanding loans and ensuring a smooth transition of ownership.

There are two purposes for which you can use the benefits of key person insurance:

• For revenue purposes. You can use the benefit to improve or support the revenue-generating capacity of a business, for example if you use the policy to cover the cost of finding, recruiting and training a replacement employee.
• For capital purposes. Examples of the benefit payment being used for capital purposes include repaying debts called in after the loss of a key person, and to replace the lost profit the key person would have generated.

Key person insurance guide

How is each cover type treated when it comes to tax?

I already have life insurance – why should I consider income protection or TPD etc?

If you already have term life insurance in place, you might think you already have enough cover for yourself and your loved ones. However, it’s worth closely examining your financial obligations, as well as the impact an unexpected illness or injury could have on your financial position, before deciding whether life cover on its own is sufficient.

For example, if you were in a car accident and became totally and permanently disabled, you would not be eligible for a death benefit from your life insurance policy. However, you could have significant medical bills, rehabilitation expenses and home modification costs – and all while you may no longer be able to earn an income. But if you had TPD insurance as well as term life insurance, you would receive the financial support you need.

Similarly, would you be able to keep paying the mortgage and providing for your family if you were laid up due to injury or illness and unable to work? Without income protection insurance in place, you and your family could end up in serious financial difficulty.

With this in mind, it’s vital to consider a range of life insurance covers to make sure you have a sufficient level of protection in place.

Can I combine cover?

While you can opt to keep your different life insurance policies separate if you wish, many insurers allow you to bundle different types of cover together. For example, term life insurance can be paired with TPD cover and trauma insurance, while if you’re a sole trader or small business owner, you may want to consider adding business expenses insurance to your income protection cover.

Combining cover can make it much easier to manage your life insurance, as you only have one policy and one premium payment to manage rather than several. It can also lead to significant savings, with most insurers offering sizable premium discounts to customers who bundle cover.

How to choose a policy

With so many different types of life insurance available, choosing the right cover (or combination of covers) can be difficult. Before you purchase any sort of insurance, take the time to consider your cover needs, including your financial obligations and the level of financial support your loved ones might require in a time of need.

Next, start shopping around for the right cover. Compare policies and quotes from multiple insurers, paying special attention to the benefits and exclusions each insurer offers. Look past the cost of cover to the features on offer to find the best value for money.

Finally, don’t be afraid to ask for help if you need it. An experienced financial planner can help you work out what type of cover you need and how much cover you require, and then help you choose the right policy.

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