Cushioning the impact
Life cover is one type of cover that falls under the heading 'life
insurance', and may also be known as 'term life insurance'
or 'death cover'.
Life cover pays a set amount of money you die. The money will go
to the people you nominate as beneficiaries on your policy. If you
have not named someone on your policy then a Trustee or your estate
will decide where the money goes.
Do you need life cover?
Life cover is 'guaranteed renewable', meaning it will
generally only stop if you stop paying for it, or when you reach a
particular age. It will continue even if you suffer an illness or
injury which would otherwise prevent you from taking out life
If you have a partner or dependants
By setting up a way to support your loved ones after you
die, you can ensure they will be able to continue to pay the
mortgage and other expenses when you are gone.
Consider how much money your family would:
- need - to pay your mortgage and any other
debts, as well as child care, education and living expenses
- receive - from superannuation, shares, savings
and existing insurance policies, how much paid leave you have and
what type of support your extended family could provide.
The difference between these is the amount of cover you should
Also consider whether your family could sell your home and move
somewhere else or downsize to raise money to pay off your debts or
If you are single and have no dependants
When deciding how much life insurance you need, think about how
much you would need to cover your debts.
You may have enough cover through your super fund. See insurance
through super for more information.
Choosing life cover
Most superannuation funds offer default life cover that is often
cheaper than buying it separately through an insurance company, so
check this before you start looking around.
If you're considering changing super funds (like when you change
jobs) assess your level of life cover at the same time.
Generally your employer's default superannuation fund must offer
you a minimum level of life cover depending on your age (e.g.
$50,000) which you can choose to maintain or increase.
To see what level of cover you have through your super fund:
If you are not a member of a default super fund with life cover,
or you want additional cover, you can buy it directly from an
insurance company, or through an insurance broker, bank or licensed
Lifewise has more
information on the benefits of life insurance. It also has a
calculator to estimate how much life cover you might
It is important to remember that the higher your level of
cover, the more expensive your premiums will be. Ask yourself how
long you want to hold your life insurance for and make sure you can
afford to pay the premiums over time, especially if these costs
rise each year.
Accidental death cover
When researching life cover options, note the
difference between the type of life cover discussed on this webpage
and 'accidental death' cover, which only covers you if you die
because of an accident (not from an illness or disease). This type
of cover often has a long list of exclusions, so always ask lots of
questions until you understand exactly what you're
Case study: Deepak and Flo's life cover
Deepak and Flo are married. Deepak works 6
days a week while Flo works part-time and looks after their two
young kids. They realised that if Flo died, Deepak wouldn't earn
enough income to pay for full-time childcare. So they decided to
get life cover for both of them, not just for Deepak, who is the
major bread-winner. This gave them peace of mind that their family
would be looked after should something happen to either one of
Life cover tips
Here are some other things to do when choosing life cover:
- Discuss it with your family.
- Don't only insure the highest income earner in your
- Be realistic about how much cover you need.
- Decide whether you want stepped or level premiums.
- Read the PDS to find the benefits and any limitations or
exclusions on your cover.
- Once you know which cover and how much you need, shop around to
compare costs with at least two other insurers. Make sure you
compare the policies' features and exclusions and the cost of the
premiums - now and in the future. (Sometimes a cheaper policy will
have more exclusions, or it will become more expensive in the
Things you need to tell your
You need to tell your insurer anything that could affect their
decision to insure you when you are applying for, renewing or
changing a life insurance policy. You also need to tell them about
any things that happen between the time you apply and when the
insurance cover starts, that might affect your eligibility for life
cover, like certain health issues.
Some life insurance companies need you to give them details of
your medical history. If you don't have the information they
require you can get it from your doctor. If you don't give the
insurer this information they may refuse your claim, which could
affect any life insurance you apply for in the future.
Be aware that 'shortcuts' - like not having to provide any
medical details - will usually mean that the product you're buying
has more exclusions.
Making a claim on your life
If someone close to you dies and you need to make a claim,
contact their insurer or super fund and find out exactly what you
need to do. Take notes and ask them to send you copies of all the
relevant forms and policies. This process may take several months
depending on the circumstances.
Life cover is worth discussing with your family.
Talk about what would happen if you or your partner died and choose
the right cover for your circumstances.
Last updated: 06 Feb 2019