Quick Look
• Focus: Learn what life insurance actually covers, how much it costs, and what to watch out for
• Key Takeaways:
Life insurance pays a lump sum if you die or are diagnosed with a terminal illness
Cover can be held inside or outside super — each has pros and cons
The fine print matters: exclusions, waiting periods, and outdated policies can lead to denied claims
• Reading Time: ≈ 6 minutes
Introduction
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.
Leanne’s Cover Wasn’t Enough
Leanne, 39, assumed her super fund’s life insurance would cover her family. She had $150,000 in default cover.
When she passed away unexpectedly, the payout helped, but her partner was left with a $400,000 mortgage and two school-aged kids.
Had Leanne reviewed her cover earlier, she might have increased it for less than $20/month. Her partner now encourages friends to double-check their policies.
“Isn’t this just for old people?”
Not at all. Life insurance is most valuable when others rely on your income — typically in your 30s, 40s, and 50s. And premiums are lower when you’re younger and healthier.
“I have life insurance in my super — isn’t that enough?”
It might be a good start, but many default policies only cover $100k–$200k — far below what most families need.
“What if I don’t have kids?”
You may still want life cover if you have a partner, debts, or want to leave something behind for loved ones.
“Do claims really get paid?”
Yes — most are. According to APRA’s latest data (2023), over 96% of life insurance claims are paid. Claims are most often declined due to non-disclosure or ineligibility, not fine print.
“What happens to the money if I die?”
If the policy is outside super, your nominated beneficiary receives the payout directly. If inside super, the trustee pays it to your dependants or estate, depending on your nomination.
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 Super Advice?
Join MoneyGPS for low cost, tailored superannuation guidance that’s delivered completely online. You’ll get:
• Personalised recommendations based on your own figures
• Easy to read digital Statements of Advice
• Unlimited access to qualified Money Coaches for follow up questions
Start your MoneyGPS journey now and make every super 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.
• Work one on one with the Planner
• Get ongoing support through every stage of your financial journey
Book a discovery call with Planning IQ today and take the first confident step towards comprehensive wealth management.
Disclosure: General information only. Consider your objectives, financial situation and needs, and seek professional advice before acting.
How We Keep It Trustworthy
Every article includes a Review & Fact Check section below — so you know exactly where our facts come from, what’s uncertain, and whether there’s any bias.
Review & Fact Check
Fact References
• Life insurance definitions, costs, and structures – MoneySmart (moneysmart.gov.au)
• Superannuation-based insurance rules – Australian Taxation Office (ato.gov.au)
• Claims statistics – APRA Life Insurance Claims and Disputes Report (2023)
Unverified or Inconclusive Items
• Case study based on typical scenarios; no real person referenced
• Premium costs are indicative and will vary across providers
Time Sensitivity
• Tax and super rules may change after 1 July 2025
• Premiums and insurer definitions can evolve annually
Bias Assessment
This article is neutral and educational, using official sources and avoiding promotion of specific insurers or products. It aligns with ASIC guidance on insurance literacy.
Contingencies
20th May 2025
6 min Quick Look
Focus – Learn what life insurance actually covers, how much it costs, and what to watch out for
Key Takeaways:
Introduction
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.
Isn’t this just for old people?
Not at all. Life insurance is most valuable when others rely on your income—typically in your30s, 40s, and 50s. And premiums are lower when you’re younger and healthier
I have life insurance in my super — isn’t that enough?
What if I don ’ t have kids?
Do claim s really get paid ?
What happens to the money if I die?
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 Money GPS for low cost, tailored Insurance guidance that’s delivered completely online. You’ll get:
Start your Money GPS 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.
1.
Fact References
2.
Unverified or Inconclusive Items
3.
Time Sensitivity
4.
Bias Assessment
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