Life cover

A sudden death can place financial stress on those who depend on you. If this happens, life cover can help them pay the bills and other living expenses.

What is life insurance/life cover

Life cover is also called 'term life insurance' or 'death cover'. It pays a lump sum amount of money when you die. People who rely on your income can use that money to pay the mortgage, clear debts and cover everyday costs. This gives them time and space to adjust.

Life cover may also come with terminal illness cover. This pays a lump sum if you're diagnosed with a terminal illness with a limited life expectancy.

It’s important to nominate who you want the money to go to if you die (your beneficiaries). If you haven't named a beneficiary, your estate or the super trustee (if your insurance is through your super fund) decide where the money goes.

Decide if you need life cover

Life cover can help when other people depend on your income. This might include a partner, children or other family members. It can also help if you have large debts or a mortgage.
If you don’t have people who depend on you financially, you may not need life cover. But consider getting:

• trauma insurance,
• income protection insurance or
• total and permanent disability (TPD) insurance 

in case you get sick or injured.

How much life cover you might need

To decide how much life cover to get, consider how much money you or your family would:

• need — to pay the mortgage, credit cards and any other debts, child care, school fees and ongoing living expenses
• receive — from super, savings, the sale of any investments, your paid leave balance, and support from your extended family

The difference between these is the amount of cover you should get. Having a clear number helps you compare policies and avoid under or over insuring. You can use our Life Insurance calculator to check how much cover you might need.

If you need help deciding if you need life cover, and how much, speak to a financial adviser.

How to buy life cover

You can apply for life cover:

• inside super through your super fund, or
• outside super directly from an insurer, broker or financial adviser.

Paying for default insurance through super can be cheaper and easier than buying it directly. But default cover might not match your needs. You can increase your level of cover through your super fund if you need to – but compare the cover, cost and rules with other outside super policies before deciding.

Life cover can be bought on its own or packaged with trauma, TPD or income protection insurance. If it's packaged, your life cover may be reduced by any amount paid on other claims in the package.

How life cover premiums work

Insurers set premiums based on age, health, job and lifestyle. Premiums will generally rise as you get older. Some policies keep premiums fixed for a set time then change.

If your cover sits inside super, the cost of premiums is generally deducted from your super balance. That reduces your retirement savings over time.

Premium terminology to know is:

• variable age-stepped premiums - are based on your age and recalculated at each policy renewal.
• variable premiums - charge a higher premium at the start of the policy, but changes to the cost aren't based on your age, so increases generally happen more slowly over time.

Regardless of which way you choose to pay for your cover, premiums are not guaranteed and may change annually. Speak to your insurer or read the PDS for more information.

What life insurers ask when you apply

Life insurers usually ask about your:

• age and job
• medical history and family health history
• smoking and lifestyle
• high risk hobbies or sports

If an insurer doesn't ask for your medical history, it may mean that the policy has more exclusions or narrower policy definitions.

The information you provide will help the insurer to decide:

• if they should insure you
• how much your premiums will be
• terms and conditions for your policy

Answer honestly. If you leave out important details, the insurer may change or cancel your cover or refuse a claim.

To understand what's covered under a policy and the exclusions, read the product disclosure statement (PDS).

Questions to ask before buying life insurance

Use this checklist when you compare life cover policies or speak with an insurer, broker or adviser. These questions help you spot gaps and hidden costs.

Questions to ask yourself:

check_box Who do I want to receive the payout? Who are the nominated beneficiaries, or how does the super fund decide?

check_box How much cover do I need? Have I worked out the right amount of cover to pay for the needs?

Questions for the insurer:

check_box What events are covered? Does the policy pay for death, terminal illness, or only accidental death?

check_box What exclusions apply? Are there limits for pre-existing conditions, suicide or risky activities?

check_box How will premiums change? Do they rise with my age or not? What other increases could happen each year?

Extra questions if the cover is through your super fund:

check_box What happens if my super becomes inactive? Will cover end if I stop contributing or my super account balance runs out?

check_box What happens to the cover if I change jobs? Does changing employer change the life cover I have in my super?

check_box Will I need medical checks to increase cover? What’s the process if I want more life cover than the default amount?

If someone close to you dies and you need to make a claim, or if you need to make a terminal illness claim, see how to make a life insurance claim.