We never know what’s around the next corner. But with life insurance, you can help make sure that whatever happens, your loved ones are financially protected.
What is life insurance?
Life insurance is a general term to describe a number of different insurance cover options that provide a financial safety net for you and your loved ones when things go wrong.
There are different types of life insurance cover types, including:
- Death cover – pays a lump sum if you die, or become terminally ill. If you die, the money will generally be paid to the beneficiaries you specify on your policy or to your Estate.
- Total and Permanent Disablement (TPD) cover – often combined with death cover, this pays a lump sum if you become totally and permanently disabled, and are unable to work. This can help you pay your ongoing medical and living expenses.
- Trauma cover – pays a lump sum if you suffer from a specified serious illness – like cancer - or a specified serious injury, such as losing a limb.
- Income Protection cover – pays a regular benefit if you are temporarily unable to work due to an illness or injury. The length of time you will receive benefits for will depend on your policy – however, generally cover will cease at age 65.
Who should consider it?
If you have people who depend on you financially, you should consider taking out life insurance. For example, if you have recently married, started a family or have a financially dependent partner or parents, life insurance can help ensure that they will be looked after if you are unable to look after them yourself.
Life insurance can also help to get you through temporary setbacks, helping ensure you can cover your living expenses, debts – like your credit card and mortgage repayments – and medical costs if you become seriously injured or ill. It can also help you through major events such as your partner passing away.
How it works
When you apply for Life Insurance, you can often choose how much you would like to be covered for, based on your personal needs – for example your family’s living costs and debts.
In return for cover, you pay a regular premium, which will vary based on the types of cover you choose, the amount you choose to be covered for, your age, medical history and lifestyle factors, like whether you smoke. Generally, the higher the amount of cover you have and the older you are, the higher your premium will be.
Insurance and superannuation
Most superannuation funds offer death and TPD insurance to their members, with some also offering income protection insurance. Having insurance within your super has some potential advantages:
- It can be an easy and cost-effective way to get cover, as you may be eligible for a standard amount of cover without having to be individually assessed.
- You may benefit from cheaper group insurance premiums, which may be less than if you bought insurance outside super.
However, you may find that the default amount of cover isn’t enough for your needs, in which case you may choose to increase the amount of cover within your super fund, or top up your total cover with a separate policy outside super.
Also, not all types of life insurance are available within super – Trauma cover can only be held outside super, and some funds don’t offer income protection insurance.
It is also important to read the documents provided with your insurance policy as the insurance terms may be more restrictive inside super for when a benefit can be paid because they need to align to superannuation rules set out by legislation such as the Superannuation Industry (Supervision) Act 1993.
Find out more about Insurance inside Superannuation.