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Life Insurance

Types of life insurance

2023-06-30 04:30

'Life insurance' is often used as a broad term to describe a range of insurance types. Find out more about each one as we explain the different types. 

There are five different insurance options sitting under the umbrella term of 'life insurance'. Life or term insurance provides a lump sum payment for your dependents if you pass away while critical illness or trauma insurance provides cover for serious medical issues, such as cancer or a heart attack. Read on to learn more about each one.

1. What is life or term life insurance?

Life or term life insurance products are designed to provide a lump sum payment if you were to pass away or, in some cases, an early payment if you're diagnosed as terminally ill.

Life insurance is often taken out by those who have financial dependants – such as a partner, children or aged parents – who would be affected if they were no longer around.

To learn more about life insurance, read our article Life insurance FAQs.

2. What is critical illness (trauma) insurance?

Critical illness insurance, also known as trauma insurance, can provide cover for a covered serious medical issue. (Think cancer, a heart attack, a stroke or a severe injury.) Check which particular illnesses an insurer covers, and the definitions of each condition in the policy, as insurers differ in how they classify these conditions.

We all face the possibility of suffering a life-altering medical emergency. People generally take out critical illness insurance to ensure they can concentrate on their recovery, rather than having to worry about their finances, in the event of a health crisis.

This type of cover can either be purchased as a policy on its own, or as an optional benefit in a term life insurance policy.

To learn more about critical illness insurance, read our article Critical illness insurance FAQs.

3. What is income protection insurance?

Income protection insurance (or salary continuance) can be paid if a serious illness or injury prevents you from being able to earn an income for a period of time. Waiting periods apply for when you will need to be off work before you become eligible to receive payment. These often range from 30-90 days. Claimants are generally paid a proportion of their standard income depending on the type of cover (generally no more than 70 per cent of their income) during the period they are unable to work or until the end of their nominated benefit period, whichever comes first. You can usually select a benefit period when you apply for cover from 6 months through to age 65.

Income protection insurance is for those who want the security of knowing they'll still be able to cover their expenses or maintain their lifestyle following a health-related setback. Many Australians don't have much of a financial buffer. Those with income protection insurance have the reassurance that they can still have an income stream if an illness or injury prevents them from performing their regular occupational duties.

4. What is total and permanent disability insurance?

Total and permanent disability, often referred to as TPD, insurance can cover you against the possibility of not being able to ever work again due to an injury or illness.

There are two types of TPD insurance. One type will support you if you are unable to work in your own occupation. The other (cheaper) type will only provide a payout if you are unable to work in any occupation you are suited to based on your education, training and experience.

TPD insurance is often purchased as an 'add on' to a life insurance policy.

5. What is funeral insurance?

The cost of a standard funeral in Australia has a wide range. It can start from around $4,000 for a basic cremation and up to $15,000disclaimerfor a more elaborate or premium burial.

To assist their bereaved family or friends with these sudden costs, some people take out funeral insurance. This provides a lump sum, which can be used to pay for expenses such as the funeral director’s fee, or other funeral expenses and can generally be paid very soon after receiving the completed claim requirements.

Types of life insurance

Discover more about life insurance

Insurance can help protect you and your loved ones from the unexpected. We've partnered with Zurich Australia – one of Australia's largest and most experienced life insurers – to help you take care of yourself and the ones who rely on you.

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This information is current as at date of publication and is subject to change.

The issuer of this information is ANZ. While ANZ has taken care to ensure that this information is from reliable sources, it cannot warrant its accuracy, completeness or suitability for your intended use. To the extent permitted by law, ANZ does not accept any responsibility or liability arising from your use of this information.

ANZ has entered into a long-term strategic alliance agreement with Zurich Australia Limited (Zurich), ABN 92 000 010 195, AFSL 232510 of 118 Mount Street, North Sydney, NSW 2060, the issuer of Ezicover insurance products. Ezicover is a registered trademark of Zurich. The issuer of Ezicover insurance products is not a Bank. Although ANZ distributes these products, these products are not a deposit or other liability of ANZ or its related group companies. 

Australia and New Zealand Banking Group Limited (ANZ) ABN 11 005 357 522 AFSL 234527 is an authorised deposit taking institution (Bank) under the Banking Act 1959 (Cth). The issuers of these products are not Banks. Although ANZ distributes these products, these products are not a deposit or other liability of ANZ or its related group companies. None of them stands behind or guarantees the issuers or the products. 

This information is of a general nature and has been prepared without taking account of your objectives, financial situation or needs. You should consider whether the information is appropriate for you having regard to your objectives, financial situation and needs.