Life Insurance: What It Is, How It Works & Why You Need It

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Sophie Ryan

Last Updated: 14th October 2022

There’s no doubt the last few years have been tough for most Aussies. The COVID-19 pandemic has changed our lives and made us think more about our health and safety, particularly older Aussies, or people with medical conditions.

Most of the population is now fully vaccinated1 and tough restrictions are hopefully a thing of the past. This year, you could be feeling less concerned about your health and more worried about your finances. This may prompt you to review your household bills and work out what’s worth paying for. That’s why, it’s also good to understand the value of life insurance. We chatted to Imran Lalani from iSelect’s life insurance partner, Lifebroker, to bring you up-to-date.

We know Australian households are under increasing financial pressure. What’s the point of having life insurance? Do people need it?

Although taking out life insurance cover is a personal decision depending on your circumstances and needs, people often think life insurance only covers you for death.

There are in fact, different types of life insurance products, designed to financially protect you and the lifestyle and future you’re building for yourself and your family. Life insurance can offer peace of mind in the event an accident, serious illness or even death.

Life can change suddenly, and if something were to happen to you:

  • Life cover can help give you peace of mind by providing your loved ones (known as your beneficiary/s) with financial support through a lump sum payment if you were to pass away.
  • Total and Permanent Disability insurance can help cover rehabilitation and living costs if you’re permanently disabled and are unlikely to ever return to work again.
  • Income Protection insurance can replace part of your income so you can keep up with everyday expenses if you’re off work for a prolonged period due to sickness or injury.
  • Critical Illness insurance can cover you if you’re diagnosed with a major illness of specified severity as defined by the particular life insurer.

Would you have enough savings in your bank account to cover your financial commitments such as rent or mortgage, school fees or grocery bills, if anything happened to you? It’s during some of life’s toughest times that life insurance can offer a safety blanket of financial protection for you and your family.

How much does it cost, and how do you work out what cover you need?

Contrary to what people may believe, life insurance cover can be tailored to your individual needs to help keep premiums at a level that’s affordable to you. Information about how much the policy will cost (the premiums you need to pay), and how they might change over time, are generally laid out in the Product Disclosure Statement (PDS) of the policy. For example, with Income Protection a way you can reduce your premium could be by reducing your benefit period and/or increasing your waiting period. However, it’s a good idea to check the PDS of a particular policy when doing your research to ensure the cover is suitable to your individual circumstances. Doing this can also give you an idea about:

  • what’s covered and what’s excluded under the policy
  • what information you’ll need to give an insurer
  • Waiting Periods before you make a claim
  • how to make a claim
  • how to complain about the claims process or decision.

You may be able to get cover in or outside of superannuation. If you’re considering life insurance from an insurance provider, it’s a good idea to check with your super provider to confirm whether you already have default life insurance cover inside super, and understand what you are and aren’t covered for.

You can also compare life insurance via iSelect from Lifebroker’s range of life insurance plans and providers.

What about if you’ve had COVID-19, will this impact your life insurance policy? What about having had a COVID-19 vaccination?

More than 95% of Australians aged 16 and over have completed a course of the Australian Therapeutic Goods Administration (TGA) approved or recognised vaccine against COVID-19. So, it’s only natural to wonder if there are any implications and whether your decision to get vaccinated could affect your ability to access life insurance cover.

Some of Australia’s largest life insurance companies have come together to reassure Australians that getting a COVID-19 vaccination will not affect your ability to claim on your existing life insurance policy now or in the future. This initiative is supported by life insurance providers including AIA, ClearView, MetLife, MLC, OnePath, Resolution Life, TAL and Zurich.

You may be eligible to get life insurance even if you’ve had COVID-19, provided you meet the eligibility criteria. Life insurers generally ask you health and lifestyle-related questions as part of the application assessment process. Each policy might have different eligibility criteria and it’s best to always read the Product Disclosure Statement (PDS) of the policy you’re applying for before deciding to apply.

We know comparing life insurance can be time-consuming and confusing! That’s why iSelect has partnered with Lifebroker to help you compare from Lifebroker’s range of plans and providers. Save time and effort by comparing life insurance with our trusted partner, Lifebroker.


Sophie Ryan

iSelect Spokesperson

Sophie Ryan is an experienced journalist and iSelect spokesperson. She’s passionate about helping Australians to save time, effort and money.
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iSelect’s partnered with Lifebroker (AFS Licence number: 400209) to help you compare a range of Life Insurance policies. iSelect earns a commission from Lifebroker for each customer referred through the website or contact centre. Lifebroker do not compare all life insurers or policies in the market. iSelect Life Pty Ltd - ABN 89 124 304 347, AFS Licence Number 331128. Any advice provided by iSelect is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice iSelect gives you, having regard to your personal situation, before acting on iSelect’s advice or purchasing any policies. You should consider iSelect's Financial Services Guide which provides information about iSelect services and your rights as a client of iSelect.’