GUIDES & RESOURCES

Life Insurance Products

Life insurance can offer protection and peace-of-mind for those unexpected emergencies which can occur in our lives. When things don’t go to plan, it’s important that you and your family are financially secure.
Life insurance products

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Being affected by an illness, injury, or death is traumatic; life insurance is supposed to ease the financial burden which can often add additional stress to an already difficult time.

With different types of life insurance products on offer, it can be difficult to determine which one is suitable for your individual circumstances. Research from the Australian government shows it may be in your best interests to purchase life insurance as a separate product from a standard insurance provider, rather than as an add-on product, such as with a car loan1.

Life insurance purchased from a car yard (with a car loan) can cost as much as 17x more than standard insurance purchased through a super fund2, so it’s always a good idea to compare policies to ensure you’re getting a good deal. Keep reading below to learn more about life insurance products currently on offer.

Available life insurance products explained

Life Insurance:

Life or term life insurance generally pays out a lump sum if the policy holder dies before a pre-agreed date (the “term”).

Term life or life insurance is intended to provide for your family and dependents if you were no longer around, and is made up of a lump sum that should be enough to provide for your family’s long-term financial requirements, subject to policy limits.

Life insurance doesn’t just cover the main salary earner. If you’re a homeowner, you should consider how your other half would be able to run the household and hold down a full-time job if you weren’t around. Life insurance could be invaluable for both partners in a relationship.

Trauma:

Trauma cover is generally paid out on the diagnosis of a specific critical illness, such as cancer, a stroke, or a heart condition.

If you’re diagnosed with a critical illness, trauma insurance can help relieve your financial difficulties. Unlike income protection, which is dependent on your inability to work, trauma cover aims to provide a payment on the diagnosis of the defined critical illness (as defined in the Insurer’s Product Disclosure Statement), regardless of your working status.

TPD - Total and Permanent Disability:

Total and Permanent Disability (TPD) cover usually pays a lump sum if you become totally and permanently disabled and are unlikely to ever work again as a result. TPD insurance covers a range of expenses incurred as a result of the disability, such as rehabilitation, debt repayments, medical costs and the future cost of living3.

Income Protection:

Income protection insurance generally pays you a monthly income if you suffer from an injury or disability that prevents you from working. This applies whether you’ve had an accident or been affected by an illness that requires a long recovery period or that makes you unable to work again.

Most policies pay up to 75% of your gross annual income4. These payments generally continue either for a specified period of time or until you reach the age of 65 or in some case 70.

What can you use life insurance for?

Providing financial support to you and those that rely on you, life insurance covers things like medical and funeral costs, and ongoing expenses for your family. Life insurance is generally paid out as a lump sum if anything happens to you, excluding cases of suicide or death due to self-harm generally in the first 13 months of cover.

For other cases of death or serious illness or injury, your beneficiaries can use the funds for expenses such as:

  • Paying off outstanding debts
  • Education fees
  • Costs of living
  • Medical and travel expenses
  • Assistance with household duties

Not everything is covered here, as each policy varies, so it’s best to compare life insurance policies to find the most suitable choice for you, and always read the relevant Product Disclosure Statement before purchasing a policy.

What level of life insurance do you need?

The level of coverage you take out is down to you and will be paid as a lump sum if anything were to happen, depending on the conditions of the specific policy. To work out the cover you may need, you need to consider some main factors5: 

  1. How much does your family need? What is necessary to cover your mortgage and existing debts, as well as ongoing expenses such as childcare and education?
  2. How much would your family receive already? Consider things like superannuation, savings, shares, and the support your family could provide.

The difference between both amounts is the level of cover which may be suitable for you.

Consider your individual circumstances when comparing life insurance policies. If you have no or few dependents, for example, you may require a lower level of cover than a parent with a large family.

Compare life insurance from our range of partners with iSelect

Finding a suitable life insurance product for you can be overwhelming, but it doesn’t have to be. With iSelect you can compare life insurance products on offer from our range of insurers, and select the product that suits you.

You can also call us on 13 19 20 to speak with our friendly team, who can help guide you through the process.

Sources:
1. https://www.moneysmart.gov.au/insurance/car-insurance/comparing-the-cost-of-life-insurance/
2. https://www.moneysmart.gov.au/insurance/car-insurance/add-on-insurance/
3. https://www.moneysmart.gov.au/insurance/life-insurance/total-and-permanent-disability-cover/
4. https://www.moneysmart.gov.au/insurance/life-insurance/income-protection/
5. https://www.moneysmart.gov.au/insurance/life-insurance/

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