Life Insurance in Australia

Definition of life insurance

Life insurance provides financial protection to the policyholders’ beneficiaries in the event of their death. The policyholder pays regular premiums to the insurance company. In exchange, the insurance company agrees to pay a lump sum to the beneficiaries named in the policy in case of the life insured’s death.

The beneficiaries can use this lump sum to cover funeral costs, outstanding debts, and ongoing living expenses. In addition, some life insurance policies may also provide benefits if the insured suffers from a terminal illness or becomes permanently disabled.

Benefits of Life Cover

How to Choose the Right Life Insurance Policy in Australia

Choosing the right life insurance policy in Australia can be daunting, but it’s essential to ensure that you have adequate protection for yourself and your loved ones. To find a policy that meets your requirements for  you and your family, please fill in the quote form above or call us at  1300 135 205, and a specialist will be able to help you.

Life Insurance Premiums

Life insurance premiums refer to the payments made by the policyholder to the insurance provider to keep their policy in force. Typically, you’ll be able to choose a policy with either stepped or level premiums, and the frequency of premiums can vary based on the insurer and the policyholder’s preferences. Common options include weekly, fortnightly, monthly or annual payments. Some insurers may offer incentives for paying premiums annually.

Factors affecting life insurance premiums

Source: Life Insurance Direct Comparison Engine (March 2023; Premium estimates for examples in NSW)

Note: These are just examples, and the impact of each factor on premiums can vary depending on the insurer, policy type, and other individual factors.

How your life stage affects your cover requirements

Your life stage can significantly affect the level of coverage you may require. As your family, lifestyle and financial circumstances change, reviewing your insurance needs is important. Generally speaking, when you are younger and single, you may need less coverage than when you enter parenthood or later in life when assets such as property accumulate.

For example, if you are a young adult and don’t have any dependent children or substantial assets to protect, you may want a low level of cover . However, if you have a mortgage or other debt not covered by another insurance policy, more comprehensive or levels of cover may be necessary.

Compare life insurance costs

Insurer	Male; Stepped	Female; Stepped	Male; Level	Female; Level
	$32.21	$25.34	$141.79	$117.57
	$31.48	$24.61	$97.31	$73.14
	$32.67	$25.45	$101.17	$78.93
	$37.06	$29.43	$122.85	$98.97
	$37.71	$29.89	$105.17	$78.45
	$38.33	$29.25	$118.86	$96.88
	$39.81	$33.42	$115.72	$91.91
	$43.31	$34.40	$106.58	$83.18

Source: Life Insurance Direct Comparison Engine (March 2023, Premium estimates for $ 1 million of life cover for a 35-year-old non-smoking individual who lives in NSW)

How to compare policies

When comparing life insurance policies, it’s important to consider several factors to ensure you choose the right one that suits your needs and budget. These factors include coverage amount, type of policy, premiums, underwriting process, and insurer’s reputation.

1. Premiums: Policy premiums are generally made up by adding the base premium, policy fees and any applicable stamp duties. These are typically not applied to life cover but may be added to other policy types like Income Protection. To find the cheapest life cover, look for discounts for annual payments, savings when purchasing other types of cover from the same company and healthy life discounts. Alternatively, you could save on your premiums by maintaining a healthy lifestyle.
2. Premium Types: Typically, there are three types of term life premiums:
   • Stepped premiums: Start cheap but cost increases as you age each year.
   • Level premiums: These may be more expensive when you apply for cover but do not increase due to a change in age and are worth considering for long-term affordability.
   • Hybrid premiums: Combines stepped and level premiums. Your premiums start as stepped but are converted to level style policy once the stepped premiums reach a higher amount than the level premium amount.
3. Built-in Benefits: It’s important to examine the benefits you receive from your life cover. Some benefits are standard. However, these benefits may only be found in some policies. Or, some benefits may come standard with one provider but could be a paid-for option with another insurer. Common built-in benefits include:
   • Terminal illness benefit: If you are diagnosed with a terminal illness and have less than 12 -24 months to live, depending on the insurer, they will pay the full death benefit to you in advance.
   • Funeral advancement benefit: Typically range from $10,000 to 10% of your sum insured to help cover funeral expenses once the insurer receives the full claim forms and a valid death certificate.
   • Future insurability benefit: Allows you to add to your cover after a significant life event without providing additional medical information.
   • Financial advice benefit: Depending on your insurer, you could be reimbursed for the cost of obtaining financial advice. Depending on your insurer, this benefit generally ranges between $2,000 and $5,000.
   • Premium freeze option: If you’re on a stepped premium structure, you can freeze your premiums. However, your level of coverage will typically be reduced to keep your policy at its current price.
   • Indexation: To help your policy keep up with inflation, your level of cover increases either by the CPI or a set percentage (3-5%, depending on the insurer) each year, whichever is greater.
   • Interim cover: If you pass away due to an accident during your policy assessment, your insurer may provide a lump sum payment. Insurers generally pay out the lesser of $1,000,000 or your sum insured at the time of application.
4. Exclusions: A standard exclusion refers to events, conditions, or circumstances your insurer won’t cover. For instance, most insurers won’t pay out your policy if your death resulted from suicide in the first 13 months after your policy was accepted. However, read your policy disclosure statement (PDS) to find out what you won’t be able to claim.
5. Expiry Ages: Different policies have different expiry ages. Typically, you’ll find that most term life policies expire when you turn 100 years old. However, it’s best to check with your insurer.

Other policy terms and conditions: It’s important to read your policy’s product disclosure statement. For instance, if you try to avoid exclusion by failing to inform the insurer of your medical conditions, the insurer might be within their rights to decline a future claim or void your policy.

Personally owned vs. Super owned.

You generally can purchase a policy with you as the policy owner and payer of the premium. Alternatively, you can take out a policy through your superannuation, where the fund is the owner and payer of the premiums, with you being the life insured. 

Structuring your policy through super can  have several disadvantages  from cover purchased outside of Super. These include limited features and more stricter access to benefits as you need to meet SIS conditions of release and  policy terms and conditions before any benefits are paid.