Life Insurance: a financial safety net for the people who rely on you
Life Insurance pays a lump sum to your family or estate if you pass away or are diagnosed with a terminal illness, so they aren't left managing your debts and your absence from the household budget at the same time.
What is Life Insurance?
You choose a sum insured and pay a regular premium. If you die while the policy is in force, the insurer pays the sum insured to the people you've nominated, or to your estate.
Most policies also include a terminal illness benefit. If doctors certify that you're unlikely to live beyond a set period (commonly 12 months, though some insurers use longer), the money can be paid early, when you and your family could use it most.
What the money can help with
- Paying off or reducing the mortgage and other debts
- Replacing your income while the household adjusts
- Childcare, schooling and future education costs
- Funeral and final expenses
- Giving your partner choices, like time off work or a slower return to it
Who it's usually most relevant for
- People with a partner, children or other dependants who rely on their income
- Anyone with a mortgage, personal loans or a guarantee someone else would be left to meet
- Business owners and partners whose death would put the business or co-owners under strain
- Single-income households, where there's no second wage to fall back on
Why it matters at different stages of life
How much Life cover matters tends to follow your debts and dependants. It's usually highest while the mortgage is large and the kids are young, then eases as those obligations shrink.
20s
Starting out
Often fewer debts and dependants, so the need can be modest. It's worth checking what's already held in your super, and cover taken out while you're young and healthy is usually cheaper to start.
Late 20s–30s
Partner & first home
A shared mortgage means a surviving partner could be left with repayments that are hard to meet on one income. This is often when people take out cover for the first time.
30s–40s
Growing family
Typically the period of greatest need: dependent children, a mortgage, and a household that relies on one or both incomes.
40s–50s
Peak earning years
Debts may be shrinking, but school fees, lifestyle commitments and your partner's retirement plans can still depend on your income.
55+
Nearing retirement
The need usually tapers as debts are repaid and children become independent. Some people keep cover for estate planning. Premiums rise with age, so it's a good time to review what you hold.
Often a high priority Often worth considering Typically a lower priority. A general guide only. Everyone's situation is different, and the right level of cover depends on your own circumstances.
For business owners
Protecting a business as well as a family
Life cover can protect the business as well as the family. It can be used to repay business loans or personal guarantees, to replace a key person, or to fund a buy-sell arrangement so surviving owners can purchase a deceased owner's share and the family receives its value in cash.
- Business loans and personal guarantees
- Key person cover for someone the business depends on
- Buy-sell (buy-out) arrangements between owners
Things worth knowing
The details that most often surprise people, in plain language.
Premium structure
Stepped premiums start lower and rise as you age. Level premiums start higher but are steadier. Each has trade-offs, and we can talk you through them.
Inside or outside super
Premiums paid from super come out of your retirement balance, and the benefit may be taxed if it goes to someone who isn't a tax dependant. Holding cover personally gives you more control over who receives it.
Honest disclosure matters
Insurers ask about your health, occupation and lifestyle. Incomplete answers can put a claim at risk, so it pays to be thorough.
What's usually excluded
Policies commonly limit payment for self-inflicted death during an initial period after cover starts. Always read the PDS for the specific exclusions that apply.
How the four covers fit together
Each cover does a different job. Many people hold a combination of these covers.
| Cover | What it does | Pays when | Paid as |
|---|---|---|---|
| Life Insurance | Protects your family if you die | Death or terminal illness | Lump sum |
| TPD Cover | Protects you if you can never work again | Permanent disability that stops you working | Lump sum |
| Trauma Cover | Helps you through a serious diagnosis | Diagnosis of a covered serious illness | Lump sum |
| Income Protection | Replaces your pay while you recover | Illness or injury stops you working | Monthly benefit |
Common questions
How much cover do I need?
A common starting point is your debts, plus final expenses, plus the income your family would need over a set number of years, plus any education costs, less savings and existing cover. Our cover calculator on the home page does exactly this sum and gives a general starting point.
Who receives the money?
Outside super, it's paid to your estate or to a beneficiary you nominate. Inside super, it depends on your fund's rules and any nomination you've made. It's worth reviewing your nominations after big life events like marriage, separation or a new child.
Is the payout taxable?
Generally, a payout from cover held personally is paid tax-free. Inside super, the tax treatment depends on who receives it. A tax professional can confirm how it applies to your situation.
I already have cover through my super. Do I still need this?
It depends. Default super cover is often a useful base, but the amount may fall short of what your family would need, and the definitions and terms can differ from a stand-alone policy, so check your super fund's product disclosure statement.
Want to talk about Life Insurance?
Tell us a little about what you're after and we'll come back with general information and options from our product providers, in plain language and with no obligation.