Financial protection for your loved ones when you die

MoneySmart
(ASIC)

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 cover

Life cover is also called ‘term life insurance’ or ‘death cover’. It pays a lump sum amount of money when you die. The money goes to the people you nominate as beneficiaries on the policy. If you haven’t named a beneficiary, the super trustee or your estate decides where the money goes.

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.

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

Decide if you need life cover

If you have a partner or dependents, life insurance can help repay debt and cover living costs if you die.

If you don’t have a partner, or 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.

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

How to buy life cover

Check if you already hold life insurance through super. Most super funds offer default life cover that’s cheaper than buying it directly. You can increase your level of cover through your super fund if you need to.

You can also buy life cover from:

• a financial adviser
• an insurance broker
• an insurance company

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. Check the PDS or ask your insurer.

Life cover premiums

You can generally choose to pay for life cover with either:

• stepped premiums – premiums that increase over time
• level premiums – premiums that do not change over time

Your choice of stepped or level premiums has a large impact on how much your premiums will cost now and in the future.

Compare life cover

Once you know how much life cover you need, shop around and compare:

• benefits and policy features
• exclusions
• waiting periods before you can claim
• limits on cover
• the cost of the premiums — now and in the future

A cheaper policy may have more exclusions, or it may become more expensive in the future. You can find information about the policy on the insurer’s website or in the PDS.

What you need to tell your insurer

You need to tell your insurer anything that could affect their decision to insure you. You need to give them this information when you apply, renew or change your level of cover.

Insurers usually ask for information about your:

• age
• job
• medical history
• family history, such as a history of disease
• lifestyle (for example, if you’re a smoker)
• high risk sports or hobbies (such as skydiving)

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

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

It is important that you answer the questions honestly. Providing misleading answers could lead an insurer to deny a claim you make.

Making a life cover claim

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.