Quick Look
Focus – Learn what life insurance actually covers, how much it costs, and what to watch out for
Key Takeaways:
Life insurance is one of those things most people know they should have — especially once they have a partner, kids or a mortgage. But the details can feel overwhelming.
How much cover do you need? What are you actually paying for? And how do you avoid the fine-print traps that can catch families out at the worst possible time?
This guide breaks it down in plain English — so you can make confident choices and protect the people you love.
Life insurance provides a lump sum payment if you die or are diagnosed with a terminal illness (usually meaning less than 12–24 months to live). It’s designed to give your family financial stability — paying off the mortgage, covering living costs, or funding your children’s education.
But many Australians are either underinsured or unaware of what their policy covers. Some rely on default cover through super without checking if it’s enough. Others cancel policies because of cost, not realising how much they’re giving up.
Making informed choices now can make a huge difference for your family if the unthinkable happens.
| Insurance Type | What It Covers |
|---|---|
| Life cover | Lump sum paid on death or terminal illness |
| TPD insurance | Lump sum if you become permanently disabled (explained in separate article) |
| Income protection | Monthly payments if you can’t work due to illness or injury |
| Trauma/critical illness | Lump sum if diagnosed with major illness (e.g. cancer, stroke, heart attack) |
You can hold these separately or bundle them in one policy.
Everyone’s needs are different, but a common starting point is:
Mortgage + other debts
5–10 years of living expenses
Education costs for children
Funeral and medical expenses
Example:
Mortgage: $450,000
Living costs: $60,000/year × 5 = $300,000
Education buffer: $50,000
= $800,000 cover
ASIC’s MoneySmart Life Insurance Calculator can help estimate your number.
| Factor | Inside Super | Outside Super |
|---|---|---|
| Premiums | Paid from super balance | Paid from after-tax income |
| Tax-deductible? | Yes (to the fund) | No |
| Claim access | May be delayed due to super rules | Usually faster and more flexible |
| Customisation | Limited | Greater choice over cover types |
Tip: Super-based cover is convenient but not always tailored. It often ends at age 65 or 70 and may not reflect your actual needs.
Premiums depend on your:
Age and gender
Health and lifestyle (e.g. smoker status)
Occupation
Amount of cover
Type of policy (stepped vs level)
Rough monthly cost examples (non-smoker, age 35):
$500,000 life cover inside super: ≈ $30/month
$500,000 life cover outside super: ≈ $40/month
These are ballpark figures. Premiums rise with age — especially for “stepped” cover.
Automatic expiry: Some policies cancel automatically at a certain age
Stepped premiums: Costs rise each year — and may become unaffordable later
Health exclusions: Pre-existing conditions may be excluded if not disclosed
Lapsed cover: Missed payments or inactive super accounts can cancel your policy
Check your policy regularly and keep your contact details up to date with your insurer or super fund.
Life insurance doesn’t have to be complicated. When structured properly, it gives your loved ones financial breathing room — and gives you peace of mind today.
The key is to choose the right type, amount, and structure of cover — and to review it as life changes. A little attention now can make a world of difference later.
Ready for Personalised Insurance Advice?
Join moneyGPS for low cost, tailored Insurance guidance that’s delivered completely online. You’ll get:
Start your moneyGPS journey now and make every dollar work harder.
Need Full Scope Financial Planning?If you think you might need a holistic roadmap that leaves nothing out, consider booking a discovery meeting with a fully licensed Financial Planner.
Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.
Our partner’s automated service gives you expert-level guidance at a price you’ll appreciate.
Disclaimer: All information on Super Advice Ai is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on Super Advice Ai is appropriate to you before acting on it. If Super Advice Ai refers to a financial product, you should obtain the relevant Product Disclosure Statement (PDS) or seek professional advice from a licensed financial planner.
2025 © All rights reserved.
