Types of life insurance
Life insurance, explained
Life insurance can help protect you and the people who depend on you financially if something unexpected happens.
Think about what would happen if your income suddenly stopped. Could your household continue paying the mortgage or rent? Cover everyday expenses? Manage debts? Look after the kids? Keep working towards the future you’ve planned?
Life insurance can provide a financial buffer when illness, injury, disability, or death changes the picture.
How much life insurance you need – and which types of cover you choose – will depend on your circumstances, financial commitments, and the risks you want to protect against.
Four types of life insurance
Life insurance can generally be broken down into four main types: life cover, income protection, total and permanent disability (TPD) insurance, and trauma insurance.
Each protects you in a different way.
Life insurance
Life insurance, or life cover, generally pays a lumpsum benefit if you die or are diagnosed with a terminal illness, subject to the terms of your policy.
The payment can help your family manage major financial commitments such as the mortgage, debts, everyday living expenses, and future costs.
If you have a partner, children, or anyone else who depends on you financially, life cover can help provide financial security if you’re no longer there to support them.
Income protection insurance
Your ability to earn an income can be one of your biggest financial assets. Income insurance helps protect it.
If illness or injury leaves you unable to work, income insurance can replace a portion of your usual income for an agreed period, subject to the terms of your policy.
That money can help keep everyday life moving – from mortgage or rent payments and household bills to groceries and other regular expenses.
Income protection insurance can be particularly important if you’re self-employed, have significant financial commitments, or your household relies heavily on your income.
TPD insurance
Total and permanent disability insurance – or TPD insurance – generally provides a lumpsum payment if you become totally and permanently disabled and meet the definition set out in your policy.
TPD cover can help with the significant financial impact a permanent disability may have, including paying down debt, medical and rehabilitation costs, modifications to your home, and ongoing living expenses.
The definition of total and permanent disability can differ between policies, so it’s important to understand exactly what your TPD insurance covers.
Trauma insurance
Also known as critical illness insurance, trauma insurance generally provides a lump-sum payment if you’re diagnosed with a specified serious medical condition covered by your policy or suffer a traumatic event that renders you permanently injured.
Depending on the policy, covered conditions may include illnesses such as cancer, heart attack, or stroke, and traumatic events that may lead to blindness, hearing loss, or loss of a limb.
Unlike income protection, the benefit is generally paid as a lumpsum rather than replacing part of your regular income. It can give you greater financial flexibility while you focus on treatment and recovery.
Making life insurance simpler
LifeCover Direct makes it easier to understand your options and compare life insurance from leading Australian insurers.
You’ll have a real person to help you through the process, from getting quotes and completing your application to medicals, policy questions, and claims. We’re in your corner, every step of the way.