Types of Life Insurance
Find out more about the different types of policies available in Australia with Savvy today.
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Far from just a single product, life insurance is more of an umbrella term which covers many different and unique policies. With so many different types of life insurance available from a wide variety of insurers, it’s important to take the time to consider your options to help you determine which may be most suitable for you and your family.
You can find out more about what types of life insurance are available for you in Australia right here with Savvy. Learn about the differences between these policies and the areas in which each can offer cover in our comprehensive guide today.
What types of life insurance can I purchase?
When buying life insurance, it’s important to understand the differences between the various types of coverage. The main forms of life insurance you’ll be able to purchase include:
Life cover
Having life cover can offer protection to you and your family financially in the case of your death or a terminal illness diagnosis. Taking out life insurance coverage may be important if you have a mortgage and other financial and family commitments, such as supporting a family with a partner and children. A life insurance beneficiary is often yourself, your spouse or partner or your children.
Total and permanent disability (TPD) cover
Permanent disability due to an injury or illness can be a significant emotional blow which can strain one's ability to make ends meet if it prevents you from returning to work. In addition, medical expenses and house alterations can be costly, especially if you're no longer working. TPD coverage can be beneficial in helping you cover some of these costs, with policies designed specifically to help both those who are unable to return to their current position or individuals who are no longer to complete any work relevant to their education, experience or training.
Income protection insurance
A person's capacity to make a living is one of their most valuable assets and income protection helps to secure that if an accident or illness leaves you unable to work for an extended period. It can help partially replace the income you would have made if you were still at work. For a few months up to five years or the age of 65 (depending on your insurer’s terms and conditions), those who apply for coverage may be able to receive up to 70% of their income as an ongoing benefit.
Trauma cover
Trauma insurance is designed to assist you and your family financially when dealing with a significant health issue, such as a critical illness or major injury. Insuring yourself against such trauma can offer cover for conditions which may require extensive medical care, a long recuperation or rehabilitation period or considerable adjustments to your daily routine. This can include potentially life-threatening illnesses such as cancer, heart conditions and strokes.
What elements can impact the cost of my life insurance?
There is no universal rule of thumb for determining the cost of your insurance policy. Some of the factors which can influence it include:
- Age: the primary factor in what you'll pay for your premium will likely be your age. Expect to pay a more significant premium if you're over 50 or a senior compared to a younger policyholder. This is because insurance companies are more likely to pay out on your coverage if you are older.
- The policy you choose: life insurance premiums are quite variable and will be based largely on the policy you select and the insurance company you choose. Although premiums are typically calculated using the same set of factors across providers, they can vary widely depending on who you choose for your cover. That's why it's wise to compare through Savvy and analyse a range of options to help you choose the most cost-effective plan that still meets your needs in terms of protection from our panel of insurers.
- Medical history: insurers may occasionally request that you get checked out medically or look over your medical history to identify any pre-existing problems. As well as looking at your weight, blood pressure, and cholesterol, they may also ask about your family history of conditions such as heart disease or cancer. These factors increase your risk profile, meaning they can result in costlier premiums.
- Your job: some jobs are considered riskier than others, such as police officers and some performed at high altitudes. Your insurer will look into your past work if you apply for life insurance. Insurance premiums will generally be higher for you if you’re regularly exposed to potentially harmful chemicals or tasks as part of your profession, as opposed to, say, an office worker.
- Smoking: due to the increased likelihood of contracting cancer and other ailments, the cost of a life insurance policy for a smoker can be twice that of a non-smoker. All tobacco and nicotine products, including cigarettes, e-cigarettes, chewing tobacco, cigars and patches, can fall under this category.
- Genetic illnesses: if there’s a history of genetic problems in your family, your life insurance rates may be higher even if you don’t have any pre-existing health concerns. Disorders of this kind can range from cancer to haemophilia and more.
Types of life insurance
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How can I compare life insurance policies?
Level of cover
Different insurers will offer different coverage limits for different types of life insurance. For instance, while you may be able to take out up to $2 million in trauma cover and $3 million to $5 million in TPD cover, many insurers offer no upper limits for life cover. Multiple incomes, superannuation, and savings may reduce coverage needs for certain families, so some might only need $100,000 worth of coverage.
Premium price
You can increase your chances of obtaining the most affordable life insurance policy which meets your family's needs by comparing a range of quotes. While finding a cheap policy has the potential to save you hundreds of dollars over the life of your policy, it isn’t the most important factor, as you should be considering your own needs alongside the cost and prioritise the coverage you can receive.
Policy benefits
Life insurance usually isn’t as simple as paying out a lump sum or ongoing benefit when a covered event takes place. There can be plenty of other features built into your policy which may be worth looking out for, such as an advance payment to cover immediate expenses following the death of the policyholder, cover suspension options and additional insurance which may be used to help cover your mortgage payments or the cost of caring for an ageing parent.
What’s included and what isn’t
Compare the inclusions and exclusions to get the most out of your coverage. For example, life insurance policies usually include cooling-off periods and international coverage. However, policies won’t offer you universal coverage. Criminal conduct, alcohol or drug usage, competitive sports, paragliding, travel to war zones and suicide (though it may be covered outside the first 13 months) are some common exclusions.
Waiting periods
Life insurance policies usually have a waiting period. These can range from two weeks to two years for income protection insurance, while it may sit at 90 days for trauma and TPD cover, so it’s important to compare when you’re shopping around for a policy. The longer the waiting period, the longer you’ll have to wait to make a claim on your policy after purchasing.
Helpful life insurance guides
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Disclaimer:
Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.
Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.
For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.