Cushioning the impact
Life cover is one type of cover that falls under the heading
'life insurance'. Other types include total and permanent
disability cover, trauma cover, income
protection, and accidental death cover. Life cover is also
known as 'term life insurance' or 'death cover'.
Life cover pays a set amount of money when the insured person
dies. The money will go to the people you nominate as beneficiaries
on your policy. If you have not made a binding nomination then a Trustee or your
estate will determine 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 can continue to pay the mortgage and
school expenses, go on holiday and buy essentials.
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 family could provide.
The difference between these is the amount of cover you should
When purchasing life cover, take into account what other types
of life insurance you need, such as income protection and
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
If you're an employee you may already have life cover, as most
super funds offer default cover that is often cheaper than buying
it separately through an insurance company - so this should be the
first place you look.
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 purchase it from an insurance
company directly. You can also get life cover through an insurance
broker, bank or licensed financial adviser.
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 the level of
cover, the higher 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 your premiums rise
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). 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 decided to get life cover for both of them, not
just for Deepak, who is the major bread-winner. That's because they
realised that if Flo died, Deepak wouldn't be able to earn enough
income to pay for full-time childcare. Fingers crossed that they
don't need it anytime soon, but it does provide peace of mind.
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 product disclosure statement (PDS) to find the
benefits and any limitations 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 the life
insurer about things that have happened between the time you apply
and when the insurance cover starts.
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 and this 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, and will often be more expensive even though
the cover is more limited.
Making a claim
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 something that's worth talking
over with your family. Discuss what would happen if you or your
partner died and choose the right cover for your circumstances.
Last updated: 10 Sep 2018