Considering Life Insurance to Protect Your Family

Taking care of your family is your number one priority, and there’s no reason why this should change when you’re no longer around. Life insurance generally ensures that your loved ones are financially provided for while they deal with the emotional strain of your loss and for the foreseeable future.

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Benefits of Life Insurance

  • Pays a lump sum benefit to your beneficiaries when you pass away or get diagnosed with a terminal illness.
  • Premiums from as little as $20.47 a month**.
  • Worldwide cover,  24/7
  • You can apply if you are aged between 10 and 74 years old
  • Available for purchase through your superannuation.

Generally, there’s no wrong time to apply for life cover. But, you may find yourself led to the decision after certain significant milestones in your life. A recent research study by Asteron has revealed the following life events are the most common prompt for purchasing life cover:

Starting a family (51%)

Your life cover may be used to help your family maintain their quality of life when you’re no longer able to provide for them.

Buying a house (46%)

Life cover should be able to help your loved ones pay off the balance of what you owe on your mortgage.

Getting older (39%)

Typically, as you get older, your financial responsibilities increase, and your awareness that you are not invincible increase, therefore start to think about putting appropriate cover in place.

Typically, there are several different ways to financially protect yourself and your loved ones throughout your life. However, you’ll need to understand which events you’d like to have protection against first as this generally determines which types of cover you’ll need.

What are my options?

Types of life cover

Alternatives to life insurance

  • Savings accounts / Investments: Instead of purchasing life cover, you may have enough savings to provide for your family. When you pass away, your family will generally be able to access the funds immediately.
  • Net Properties / Investments: Another option is to have all of your liabilities more than covered by your assets. Your assets can typically also be sold or potentially used to generate income to help your loved ones maintain their lifestyle.
  • Ongoing Income / Investments: You may have ongoing income from investments, properties or shares that will continue in perpetuity that may provide the income your family needs.

Building up savings, investments and continuous income to care for your family is generally a good idea. However, for example, most families’ annual saving rate is 8.6%, which equals roughly $9 for every $100 earned. While this sounds like a lot, a person who earns $100,000 per year would need to save for more than 55 years to save $500,000.

While saving your money is a good idea, however, often families need financial protection now. Therefore they may want to consider an appropriate life insurance policy as this can be a cost-effective method of providing financial security in the event of terminal illness or death while these savings, net investments build.

What is life insurance?

This type of insurance pays out a lump sum of money after your death or terminal illness diagnosis. The benefit can be paid to your nominated beneficiary or your estate. This money can be used to pay off debts, loans or financially provide for your loved ones as required.

To secure this financial protection for your family, you’re generally required to pay a monthly or yearly premium to your insurer. Typically, several different factors influence your premiums. These factors include your age, genders, occupation, and lifestyle factors like your smoking status.

Pros and Cons

AdvantagesDisadvantages
Beneficiaries receive a benefit when you die, which helps them maintain their lifestyle. Or it can be used to take care of other financial obligations.Cover ends at a certain age, Typically 99 years; however, this varies by insurer.
The lump-sum benefit on a personally held policy is generally tax-free.Your premiums are affected by the results of your lifestyle factors. E.g. premiums are higher for smokers than non-smokers.
Depending on your policy, if you are diagnosed with a terminal illness and have a life expectancy of less than 12 -24 months, you’ll generally receive the full death benefit to you in advance.There are typical exclusions that you need to be aware of, e.g. 13 months for suicide. However check the relevant for PDS for full terms and conditions.
You’ll be able to link your life cover with other policies, like TPD and Trauma insurance.Your medical history can impact your premiums. Therefore you should consider putting cover in place while you are in good health.
You have the option to select stepped or level premiums. Stepped premiums generally start lower and increase as you get older. In contrast, level premiums are based on your entry age, therefore start higher and are therefore generally more consistent.
Your level of cover increases by a set percentage (3-5% depending on the insurer) or the CPI, depending on which is greater. This helps to keep up with inflation.

Do you need life insurance?

Generally, you’ll require cover if your spouse and children are dependent on your income. Term life cover is worth considering if you have a mortgage and/or a young family. Alternatively, if you’re caring financially for your aging parents, you may also want to consider purchasing a policy.

What to consider before calculating a sum to insure yourself for?

There are several important factors to keep in mind before you buy life cover. This includes:

Generally, these factors will influence your decision on how much coverage you need. Please speak to a specialist about your policy options in making your policy more affordable, whilst still ensuring it matches your requirements.

How does my life stage impact me?

In your 30’s and 40’s, the need to apply for life cover may become increasingly apparent. But, as you near your 60’s and you may not have any child dependents anymore, you might be wondering if it’s still a good idea to maintain your policy at a reduced level.

The value of life cover during different life stages include:

  • Singletons: In your early 20’s, you generally don’t have many financial obligations, and your chances of dying are low. So, your premiums will typically be lower than at any other stage in your life.
  • Couples: Whether you’ve just gotten married or you’ve bought your first home, life cover during this stage of your life is usually a good idea as it means your loved one won’t need to be concerned about financial strains after your death.
  • New families: Taking out a policy when you’re planning on starting a new family or if you’ve just had a baby means you’ll be caring for your family even if you’ve passed away. Your benefits in this stage will typically be used to cover the costs of raising a child. These expenses may include mortgages, education and living costs.
  • Divorces: If you’re separating from your partner and you need to pay child support, you may want to review your life cover. Typically, you’ll need more coverage so that your financial support of your children continues should you or your ex pass away unexpectedly.
  • Senior years: Many people over the age of 60 still have lower debts/ financial obligations. By maintaining your policy, potentially at a lower level in your later years means your loved ones will be able to pay off all outstanding debts, allowing them to grieve without the pressure of financial stress.

How much does life insurance cost in Australia

The average cost of life insurance in Australia will vary based on several factors, including your age, gender, the sum insured. Premiums can start from as low as $20.47 per month for a $1,000,000 worth of cover on monthly stepped premiums.

Research from a number of major life insurance brands is below.

Average stepped monthly life insurance premiums:

Sum insured20 year old30 year old40 year old50 year old60 year old
$200,000$23.71N/A$20.47$38.59$141.88
$500,000$41.56$25.61$29.50$71.48$275.56
$1,000,000$68.99$41.70$46.98$122.67$484.10

Source: Life Insurance Direct, December 2020, non-smoking male, stepped premium, monthly based in NSW, Retail life insurance Brands

Average level monthly life insurance premiums:

Sum insured20 year old30 year old40 year old50 year old60 year old
$200,000$29.18$28.67$41.04$97.96$233.06
$500,000$53.01$47.97$77.06$191.66$462.09
$1,000,000$90.87$82.09$134.23$338.71$812.38

Source: Life Insurance Direct quote form, December 2020, non-smoking male, level premium, monthly based in NSW

Take note: The premiums above were calculated for a non-smoking male with no pre-existing medical conditions.

Everyone’s requirements and situations are different. Therefore, you may want to request a quote today to discover which life insurance policy is best for you.

We make it easy for you to compare policies online with our powerful comparison engine.

Buy with confidence today for peace of mind tomorrow.

How to compare policies

Generally, you’ll need to examine the following factors before deciding which cover is right for you:

  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:
    1. Stepped premiums: Start cheap but increase in cost as you age each year.
    2. Level premiums: May be more expensive when you apply for cover but do not increase due to a change in your age and are worth considering for long-term affordability.
    3. Hybrid premiums: Combines stepped and level premiums. Your premiums start as steeped but is 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 not be found in every policy. Or, some benefits may come standard with one provider but could be a paid-for option with another insurer. Common built-in benefits include:
    1. 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.
    2. Funeral advancement benefits: This benefit typically ranges 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.
    3. Future insurability benefit: Allows you to add to your cover after a significant life event without having to provide additional medical information.
    4. Financial advice benefit: Depending on your insurer, you could be reimbursed for the cost of obtaining financial advice. This benefit generally ranges between $2,000 and $5,000 depending on your insurer.
    5. Premium freeze option: If you’re on a stepped premium structure, you’ll be able to freeze your premiums. However, your level of cover will typically be reduced to keep your policy at its current price.
    6. 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.
    7. Interim cover: If you pass away as a result of 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 that your insurer won’t cover. For instance, most insurers won’t pay out your policy if your death was the result of 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 for.
  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, its best to check with your insurer.
  6. Other policy terms and conditions: It’s important to read through your policy’s terms and conditions. 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 have the option to purchase a policy with your as the policy owner and payer of the premium, or 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.

These types of policies have several key differences from cover purchased outside of super. These include limited features, claim delays because you need to meet certain conditions of release as well as the policy terms and conditions before any benefits are paid.

Pros and Cons of life insurance inside Super

AdvantagesDisadvantages
Premiums are paid from your superannuation account, so there are no out of pocket costs.Insurance premiums generally lower your Super balance (retirement savings).
You may be entitled to discounts for paying annually.You must meet the Policy Terms and conditions and the SIS legislation conditions of release before your benefits can be released.
Life insurance premiums paid by your super fund are generally tax-deductible to your fund at 15%.There is less certainty on death nomination, and nominations are easier to dispute, even with a Binding Death Nomination.
XIf your benefits are paid to a dependent who is not financially dependent on your, for instance, an adult child, the benefits are generally taxed.
XYou may not be entitled to common built-in benefits like the Funeral Advancement Benefit.

What is the best life insurance policy in Australia?

The best cover for you generally depends on your unique requirements. So, it may be a good idea to shop around and find the best option for you and your family. Keep in mind that all insurers are different, so they’ll analyse your situation differently.

However, to find the best life cover for you, there are a few things you should typically consider. Firstly, you should examine the duration of the policy. It’s also important to consider the built-in benefits. The right policy for you typically includes several common built-in benefits and some or all of the exclusive built-in benefits offered by the insurer. Generally, you’ll also want to examine the Product Disclosure Statement (PDS) to ensure that you choose a policy with as few exclusions as possible.

We understand how difficult it is to find the right protection for you and your loved ones, while still keeping money in your pocket. You are not alone; we have made protecting your loved ones our mission.

“The leader in Informing, protecting, and providing for Australian families.”

Frequently asked questions and answers

  • Which type of policy should you buy?

    The type of cover will depend on you and your family need financial protection against, and the amount of cover you choose could be influenced by factors like your age, income, occupation, health, smoking status, and debts. Give us a call at 1300 135 205, and we can assist you with any questions you may have.
  • Where to get insurance quotes?

    You can get quotes online with our unique comparison engine, alternatively a broker or financial adviser. You could also approach your bank or super fund; there are many options; however compare premiums, features and exclusions to ensure it meets your requirements.
  • Is life cover worth it?

    This usually depends on your unique requirements. As you age and your circumstances change, your need for term life cover will also evolve. However, if you have a mortgage or loved ones who are financially dependent on you, life cover is generally worth it. The benefits that they receive after your death or terminal illness diagnosis can be used to pay off debts, fund your kids’ education or help them maintain their lifestyle.
  • At what age can you get cover?

    Typically each insurer sets the minimum age of the life insured, which can be as low as 16 years old. However, to be the policy owner, you may be required to be 18 to enter into a financial contract, which you’ll need to do when applying for any insurance policy. You might also want to note that all insurers vary, so it’s best to check with them or call 1300 135 205.
  • When does your policy end?

    Most life cover policies end when you turn 100 years old. However, it’s important to note that this varies between insurers. To find out more about the end date on your policy, it’s best to check your Product Disclosure Statement (PDS).
  • What is the maximum life cover you can get?

    This varies by insurer; however, for a number of insures, there is no limit so long as you can financially justify the level of cover applied for. However, best to consult the relevant PDS of the policy you are considering.
  • Can you get whole life cover in Australia?

    Generally, no, in 1992, the Australian government introduced compulsory superannuation, and as a result, whole life cover was primarily replaced by term life cover. Whole life cover policies that were opened before 1992 are still valid. But, if you applied for cover after this, you typically have a term life policy. It’s generally best to check before cancelling if you are not sure.
  • Can you have multiple policies?

    Yes, usually you’re entitled to have more than one life policy. However, your policies will need to be justified, and you’ll need to disclose your existing cover to the insurer before you apply for any new / additional policies.
  • When do life insurance companies pay claims?

    Generally, your insurer will pay claims on your term life policy in the event of your death. However, certain policies may have a terminal illness benefit. Typically, these benefits payout if you are diagnosed with a terminal illness and two specialists confirm that you have less than12- 24 months to live. However, this generally varies between insurers, so you may want to check your Product Disclosure Statement (PDS).

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