- Life insurance & income protection and COVID-19 FAQ
- Income Protection Insurance
- Choosing The Best Income Protection Insurance
- Is Income Protection Insurance Tax Deductible?
- Income Protection Through Superannuation
- What Is Income Protection Insurance?
- Income Protection vs Mortgage Protection
- Income Protection – A Basic Breakdown
- MLC Income Protection
- TAL Income Protection
- CommInsure Income Protecion Insurance
- Life Insurance Products
- What is Life Insurance?
- Why Do I Need Life Insurance?
- How To Purchase Life Insurance
- Key Person Insurance
- Life Insurance vs Income Protection
- Life Insurance Glossary
- Frequently Asked Questions
- Is Life Insurance Tax Deductible?
- How Much Life Insurance Do You Need?
- AMP Life Insurance
- Best Life Insurance
- Family Life Insurance
- Income Protection & GST
- Life Insurance And Superannuation
- Life Insurance For Seniors
- MLC Life Insurance
- When Is Life Insurance Paid Out?
How To Buy Life Insurance In Australia
A report released in 2018 by ASIC (Australian Securities & Investment Commission) found that the majority of Australians that purchased direct life insurance (that is, insurance without personal advice) actually knew little or nothing about their available options1.
38% of the respondents took out insurance in response to a major life event, such as the birth of a child, or getting married. They carried out little to no research beforehand and largely did not know what each life insurance product covered.
Finding suitable cover for your needs is in your best interest, so if something does go wrong, you understand which expenses may be taken care of for you and your family. In this article you’ll learn about the different types of life insurance available, and some tips for choosing a policy that’s suitable for you.
What are the different types of life insurance?
Life insurance may be sold as a single product, or can be the umbrella term for a combination of different types of cover. We’ve put together a brief description of the types of life insurance available as well as some conditions that may come with each.
Life cover/term life cover:
Life insurance (also known as term life insurance) pays a lump sum should the insured person pass away, subject to policy limits due to an illness or accident. Before you enter into a policy agreement, check if any exclusions apply. For example, you may not be covered if you have any specified pre-existing medical conditions.
Accidental death cover:
This differs from life cover because it pays a set amount if the insured person dies due to an accident only, rather than an illness.
Total and Permanent Disability cover (TPD) exists in case the policy holder becomes permanently disabled and is unlikely to ever work again. Depending on the definition on the policy, you may be covered if you’re unable to work in any occupation, or you may only be covered if you can’t work in your usual occupation.
Trauma cover provides set payments if the insured person is affected by a specified illness or injury, including but not limited to cancer, heart attack and strokes.
If the policy holder is unable to work due to an injury illness or accident, income protection insurance generally replaces up to 75% of your gross annual income lost as a result2.
Consider your life stage when purchasing life insurance
The type of life insurance you should buy depends on your personal circumstances and, what may be suitable for one person, might not suit another3. Consider the stage of life you’re currently at, looking especially at your age and number of dependents, to determine your goals and expectations when it comes to getting cover.
- Young and single: You may not have thought about life insurance just yet, but it may be worthwhile to consider how you’d financially sustain your lifestyle if you become sick or injured. Income protection, Trauma and TPD could cover you if this were to happen
- Young couples: With major life events on the horizon, you may be looking for ways to preserve you and your partner’s lifestyle. Consider how your partner would pay the mortgage and other debts if you were gone
- Young families: As a young family, your responsibilities and priorities will have changed dramatically. Life insurance could ensure your family is well taken care of and would continue to be protected if you were no longer around
- Older families: A life insurance policy could help protect your wealth and provide that extra peace of mind as you get older
While you may have a level of life insurance through your super fund, this can be limited4. Find out what you’re already covered for before you buy life insurance. You can also learn more about life insurance for families here.
Choosing a suitable level of cover and enjoying peace of mind
Despite the benefits, there is still some resistance amongst Australians to take out life insurance, with 37% of Industry Super Fund members saying it’s a low priority compared to other financial commitments5.
However, having a suitable level can ensure your family are able to keep up with financial commitments if you were to pass away. A simple equation can calculate how much life insurance is sufficient.
Summate your current and future financial obligations, and take away any existing resources you have, such as savings and assets. The number you’re left with is a general indication of the amount of life insurance you may require. At iSelect, our consultants can assist you in purchasing a level of cover that’s appropriate for you.
Should you purchase a single product, or bundle several into your policy?
The types of life insurance explained above can usually either be taken out as separate entities or be “bundled” into a single plan. You may receive a discount if you choose to combine products and their cover amounts but if you do make a claim on a bundled plan, this may affect your total benefit. On the other hand, if you have a number of standalone products and make a claim on one policy, it will not affect the others.
The decision of whether to combine products should depend on your individual circumstances. While bundling may be more convenient and possibly even cheaper, making a claim affects all combined products and may reduce the amount that’s paid.
What is the Life Insurance Code of Practice?
The Life Insurance Code of Practice was established to protect consumers and ensure they receive reliable services of a consistently high standard from their insurance provider6. In short, the Code binds companies issuing life insurance products to a set of rules, including being fair and transparent, ensuring sales are appropriate and keeping customers informed during the claims process.
It is designed to offer peace-of-mind to those taking out life insurance.
Need help finding suitable Life Insurance? iSelect is here to help
With iSelect, we can help you compare available life insurance products from our range of insurers, and help you choose the one that suits you.
You can get started comparing life insurance policies online, or call our friendly team today on 13 19 20.
iSelect does not compare all life insurers or life insurance products in the market. iSelect therefore does not compare products offered by life insurers who are not our partners. iSelect maintains an internal list of approved life insurance products that our advisers compare from all of iSelect’s partners. We call this our ‘Approved Product List’. iSelect have commercial arrangements with each of the partners. Click here to view our range of partners.
iSelect General Pty Limited ABN 90 131 798 126, AFS Licence Number: 334115. 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 we give you, having regard to your personal situation, before acting on our advice or purchasing any product. You should consider iSelect’s Financial Services Guide which provides information about our services and your rights as a client of iSelect. We receive commission for each product sold.