What is life insurance?

Life insurance offers financial protection for your life and way of living. If you die, become disabled or get seriously ill, then life insurance can help cover any existing or future expenses for your family.

What is life insurance?

Life insurance is a type of insurance that can pay out a lump sum or regular payments if you pass away or are diagnosed with a terminal illness while your policy is active. It can help your family to cover ongoing expenses, such as mortgage payments or other bills. Life insurance can also cover your funeral expenses or it can offer a cash gift to your loved ones.

What are the different kinds of life insurance?

There are different kinds of life insurance which can protect you in different ways by paying out in different situations. Often, you can choose which types of protection you want with a life insurance policy. Choosing more cover will cost more, but can also bring more protection.

• Life insurance and terminal illness. This cover pays a lump sum benefit to a nominated beneficiary if you die or are diagnosed with a terminal illness.
• Total and permanent disablement (TPD) insurance. This cover pays out if you become permanently disabled,for example, if you become paralysed. It also pays out a lump sum all at once.
• Trauma insurance. Also known as critical illness insurance, this cover pays a lumpsum if you are diagnosed with a serious medical condition.
• Income protection insurance. This cover is generally paid as a recurring monthly benefit to replace your income if you can't work due to illness or injury. Some providers also off redundancy cover if you are made involuntarily unemployed.
• Funeral insurance. This insurance is a specific lump sum benefit paid out at the time of death to help cover the cost of a funeral. Generally cover is anywhere from $3000 to $15,000.

What factors affect the cost of life insurance?

The cost of life insurance is dependent on a range of factors that will determine how likely you are to make a claim. Factors that make up a premium include your age, smoking status, general health, any options or extras you include and most importantly, the level of cover you select.

In general, the higher the risk that you will make a claim on your policy, the higher your premiums. For example, if you are older you will find that your premiums will be higher than a younger persons. This is because the risk of illness, injury or death is higher as you age.
Some of the specific factors which are likely to affect your premiums include the following:

• Your cover types. The more cover types you have with a bundled life insurance policy, the higher your premiums.
• Your sum insured or benefit amount. The more a policy has to pay out, the higher your premiums.
• Your health. Someone in poor health will usually have higher premiums than someone in good health.
• Policy features. Special features, extra cover or optional additions can raise your premiums.
• Your premium structure. Your premium structure refers to whether your life insurance policy has stepped premiums, level premiums or hybrid premiums.

Can I bundle my insurance together?

You can arrange different life insurance types in different ways. You can either get one bundled life insurance policy with the cover types you want or take out several different standalone policies to get the cover you want separately.

How much does life insurance payout?

Each cover type will have its own sum insured, even with a bundled life insurance policy. Depending on the insurer and the cover type, you might be able to choose your own sum insured or it might be set automatically.

The amount paid out for any cover type usually works in a similar way for both standalone and bundled policies. Insurers will set a minimum and a maximum amount. These minimums and maximums vary between insurers and can also be different depending on factors like your age and occupation.

• Term life insurance. This policy usually pays out the amount you choose. The maximum amount available can depend on a range of different circumstances, including your income, your age, your occupation, the insurer and others.
• TPD insurance. This generally works the same as term life insurance.
• Trauma insurance. This generally works the same as term life insurance.
• Income protection insurance. Income protection insurance often uses a benefit amount instead of a sum insured. The benefit amount is how much it pays per month. Your benefit amount might be set automatically, such as 75% of your average monthly income over the last 12 months, or you might be able to choose your own. When you choose your own, it generally cannot be more than 75%-85% of your average monthly income.

When you get TPD and trauma insurance as part of a bundled life insurance policy, you cannot generally choose a maximum sum insured more than your term life sum insured.

What are life insurance premiums?

It is important to pay attention to your life insurance premium structure because this can have a big effect on the costs.

• Stepped premiums. With stepped premiums, the insurer updates your premiums once a year and increases them based on your current age. Generally, your premiums will increase significantly over time.
• Level premiums. With level premiums, your premiums are not updated and will generally stay very similar over time. Your premiums depend on your age at the time you purchased the policy.

Some policies will let you choose whether you want stepped or level premiums, while others will only have one premium structure available.

Sometimes a policy can have a hybrid premium structure. This is when the same policy has both stepped and level premiums. For example, you might find a policy that has level premiums until you reach the age of 50 and then stepped premiums after that.

How do I apply for life insurance?

Generally, there are three different ways to purchase life insurance:

1. Go through an adviser.

Because it's so complex, many people take out life insurance policies with the help of financial advisers or insurance brokers. In fact, some life insurance providers will only sell policies through advisers and refuse to sell directly to the public. The advantage of doing it this way is that you can get some expert advice and help working out what kind of cover you need as well as access to a wider range of different policies. The downside is that it often costs more because the adviser's fee is included in your premiums for as long as you hold the policy.

2. Get it through superannuation

Superannuation life insurance is a special kind of life insurance that is often included in your superannuation automatically. Here, you pay your premiums through your superannuation contributions. The main advantage is that it can be cheap cover, but you generally have limited options and it might not be enough cover for you.

3. Find your own policy.

You can compare policies yourself, work out what kind of cover you want and determine which one is right for you. This gives you the advantage of being able to pick out almost any kind of cover, including superannuation life insurance, and find exactly what you're looking for. Generally, it can get you cover equivalent to what you're able to find with an adviser, but more cheaply. However, making sure you've found the right cover can be time-consuming, complicated and difficult.

You can compare some of your options below!

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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 two months free when you buy NobleOak Life Insurance policy. Offer ends 30 June 2021. T&C's apply.	Get Quote View details	Compare	loading Fetching your data...
ahm Life Insurance		$1,500,000	65		$1,500,000	TPD cover, Trauma cover	ahm Health members can save 10% off premiums.	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...
Insuranceline Life Cover		$1,500,000	65		$1,500,000	Trauma cover	Get a $100 bonus gift after 2 months. Offer ends 30 September 2021. Plus get 12 months cover for the price of 11 if you pay for life insurance annually. T&Cs apply.	View details	Compare	loading Fetching your data...
Zurich Ezicover Life Insurance		$1,500,000	69		$1,500,000	No optional	Get the first month free and a 10% discount if you take out a second life insurance policy (discount applies to second policy). T&C’s apply.	Get Quote View details	Compare	loading Fetching your data...
Guardian Life Insurance		$1,500,000	64		$1,500,000	TPD cover, Trauma cover	Cover up to $1.5 million with Guardian Life Insurance.	Get Quote View details	Compare	loading Fetching your data...
Medibank Life Insurance		$2,500,000	70		$2,500,000	TPD cover, Trauma cover	You could win a $2K EFTPOS gift card when you get a Life Insurance quote by 20 July, 2021. There is a new winner every fortnight. Plus, Medibank health members save 10% on premiums every year. T&Cs apply.	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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How much life insurance will you need?

As everyone has their own unique circumstances, there is no one size fits all approach. However, there are a few ways that you can work out how much cover you need.

Take look at your lifestyle and financial needs

It's a good idea to consider:

• Outstanding debts. How much debit you have left that would fall on your family?
• Finances to fall back on. Do you already have any savings, assets or existing insurance that can help cover your families living expenses if you weren't around?
• Your families living expenses. This can include food, rental and education costs.
• How long do you want to be covered for. This ties in with the amount of finances you have to fall back on, the size of your family and their ability to generate income without you.

Using a calculator

You can use our life insurance calculator to work out a rough a estimate of your cover needs. This help you when speaking to an adviser or applying directly with an insurer.

Frequently asked questions about life insurance