You insure your car. You insure your home. But what about the income that pays for it all?
It's easy to think an unexpected illness, injury, or death is something that happens to other people – until life throws you a curveball.
That's where personal insurance comes in. Different types of cover are designed to protect against different financial risks, from losing your income to leaving loved ones with ongoing expenses.
But where do you start? These seven questions will help you cut through the jargon and make sense of your options.
Different types of personal insurance
Before asking whether you need life insurance, it helps to understand the four main types of personal insurance and what they cover.
Life insurance: Provides a lump sum payment if you die or are diagnosed with a qualifying terminal illness, helping provide financial support for your loved ones.
Income protection insurance: Replaces part of your regular income if you're unable to work due to an eligible illness or injury.
Trauma insurance: Provides a lump sum payment if you're diagnosed with a specified serious medical condition, such as certain cancers, heart attacks, or strokes.
Total and permanent disability (TPD) insurance: Provides a lump sum payment if you meet your policy's definition of total and permanent disability.
Features, exclusions, and eligibility requirements vary between insurers and policies.
Click here to learn more about the different types of life insurance.
7 questions to ask yourself about life insurance
1. Who relies on me financially?
From partners and children to ageing parents, the people who depend on you financially may be more numerous than you think.
Life insurance can help your beneficiaries manage expenses such as mortgage repayments, household bills, and education costs if you die.
Things to consider:
Does anyone rely on your income?
Do you share financial commitments with someone?
What expenses would remain if you were no longer around?
2. What if I couldn't work for an extended period?
Your income keeps everyday life ticking along. But what would happen if illness or injury meant you couldn't work for months?
Income protection insurance generally provides regular payments to replace part of your income if you're unable to work due to an eligible illness or injury.
When comparing the best income protection insurance options, look beyond premiums to understand waiting periods, benefit periods, and exclusions.
Things to consider:
How long could you manage without your income?
Do you have savings or paid leave available?
How do different policies compare?
You might also encounter payment protection insurance, which helps cover certain loan or credit repayments in circumstances specified by the policy, rather than replacing part of your broader income.
Learn more about income protection insurance here.
3. How would a serious illness affect my finances?
A serious illness can bring unexpected costs, time away from work, and additional financial pressure.
Trauma insurance generally provides a lump sum payment following diagnosis of a specified serious medical condition covered by your policy. The payment can help with medical expenses, rehabilitation, or everyday bills.
Things to consider:
What additional expenses could arise?
What savings or financial support could you access?
Which medical conditions does the policy cover?
4. What if I became permanently unable to work?
Some illnesses and injuries can permanently affect your ability to earn an income.
Total and permanent disability insurance, or TPD insurance, generally provides a lump sum payment if you meet the policy's definition of permanent disability.
An important distinction is whether a policy assesses your ability to return to your own occupation or any occupation for which you're reasonably suited.
Things to consider:
What financial commitments would continue?
How does the policy define permanent disability?
Do you already have TPD cover through super?
5. Do I already have insurance through my super?
You might already have life insurance, TPD insurance, or income protection through your superannuation fund.
Premiums are generally deducted from your super balance, which can reduce your retirement savings. Cover may also change or cease in certain circumstances.
Things to consider:
What insurance is included in your super?
How much cover do you have, and what does it cost?
Could you have overlapping policies?
Your super fund's insurance information and Product Disclosure Statement (PDS) can help you understand your existing cover.
6. How much does life insurance cost?
There's no single answer to how much life insurance costs in Australia.
Premiums depend on factors including:
Age: Premiums generally increase as you get older.
Health: Medical history and smoking status can affect pricing.
Occupation: Higher-risk jobs may attract higher premiums.
Cover amount: More cover generally means higher premiums.
Policy features: Additional benefits and premium structures can affect costs.
Premium structures also matter. Stepped premiums generally increase with age, while level premiums are designed to be more stable with age, although they can still change.
Looking beyond the initial premium can help you understand the potential long-term cost of cover.
7. How do I compare different types of personal insurance?
With so many insurers and policies available, comparing cover can feel overwhelming.
A useful starting point is looking beyond price to understand what each policy actually provides.
Things to consider:
What events and circumstances are covered?
What exclusions and waiting periods apply?
How might premiums change over time?
How are claims assessed and paid?
Reading the relevant PDS and Target Market Determination (TMD) can help you understand a product's features, conditions, and intended market.
The right cover starts with a conversation
Life insurance isn't one-size-fits-all. The right cover depends on your circumstances, your financial commitments, and the people who rely on you.
That's where LifeCover Direct comes in. We take the confusion out of life insurance by helping you understand your options, compare cover from leading Australian insurers, and find protection that fits your life and budget.
No unnecessary complexity. No pressure. Just clear options so you can make a confident decision about protecting what matters most.
General information disclaimer: This article provides general information only and does not take into account your personal objectives, financial situation, or needs. Before making an insurance decision, consider your circumstances and read the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD). Consider seeking personal advice from an appropriately licensed financial adviser.