Life insurance FAQs

1. What is life insurance (also commonly referred to as term life insurance)?
2. How much life insurance do I need?
3. Is there a limit to the amount of cover that I am able to take out?
4. Who may need life insurance?
5. What are the benefits of having life insurance?
6. Can my life insurance be paid immediately to help pay for my funeral?
7. If I am diagnosed with a terminal illness, can I make a claim straightaway?
8. Can I get life insurance without a medical exam?
9. Are life insurance payouts taxable?
10. Are life insurance premiums tax-deductible?
11. How much does it cost? Are there ways to reduce my premium?
12. Can I take out life insurance policies with my loved ones?
13. Is there an age limit to taking out life insurance?
14. What can I do if I have further questions on life insurance?

1. What is life insurance (also commonly referred to as term life insurance)?

Life insurance is often used to refer to cover that provides a payout if you pass away or if you have been diagnosed as terminally ill. Other forms of cover – such as income protection, trauma and total and permanent disability (TPD) – are sometimes referred to as life insurance and may be bundled with life insurance policies, but they cover different events.

2. How much life insurance do I need?

The optimum amount of cover depends on your personal circumstances. To ensure your loved ones can maintain the same standard of living if you were no longer around, consider factors such as debt, expenses and your income and assets.
 

Debt 

• How much do you owe on your mortgage? 
• What is the total of any other loans you have, such as credit cards, car loans or personal loans?

Expenses

• What are your ongoing living expenses?
• Are you paying for your child to go to private school? 
• Is the cost of your funeral covered? 

Income and assets

• What is your annual income?  
• Do you have any savings you can use to cover day-to-day expenses?
• Are there any assets that you can sell, such as an investment property or a second car?
• Do you have any other life insurance policies (perhaps within your super) that would provide a payout?

3. Is there a limit to the amount of cover that I am able to take out?

It varies according to your income, age, other insurances held and what the insurer is willing to cover you for. The cover generally offered by insurers starts at around $50,000. The higher the cover amount is, the more likely you would need to go through a more personalised and detailed application process.

4. Who may need life insurance?

Generally, anyone who has people who depend on them financially.

5. What are the benefits of having life insurance?

Life insurance policyholders find it reassuring to know that should anything happen to them, their loved ones won’t be left in a financially difficult situation.

6. Can my life insurance be paid immediately to help pay for my funeral?

For valid claims under the policy, many insurers can fast-track a proportion of your life insurance cover within a few days of receiving a death certificate or other satisfactory evidence. This can help pay for a funeral or other final expenses while your overall claim is being assessed.

7. If I am diagnosed with a terminal illness, can I make a claim straight away?

Each policy is different, but most life insurance policies provide an early payment of the death cover in the event a relevant medical expert has diagnosed that your illness is likely to lead to you passing away within a certain period of time - usually the next 12 months.

8. Can I get life insurance without a medical exam?

Again, each policy is different as to what types of questions are asked around health, occupation and lifestyle and whether more detailed medical tests are required. Generally, the more comprehensive the cover, the more information you will need to provide before an insurer determines whether to offer you cover and on what terms.

9. Are life insurance payouts taxable?

Generally, life insurance payouts aren’t classified as taxable income so all the money paid out by your insurer will remain in the hands of your beneficiaries. You should always speak to your tax adviser for tax advice relevant to your personal situation.

10. Are life insurance premiums tax deductible?

The premiums for a stand-alone life insurance policy are generally not tax deductible. Premiums for life insurance policies through super may be tax-deductible. You should always speak to your tax adviser for tax advice relevant to your personal situation.

11. How much does it cost? Are there ways to reduce my premium?

Your premiums will generally be determined based on your health, age, occupation, and cover amount. Premiums can either go up each year as your age and cover increases or can be fixed for a specific time period.

12. Can I take out life insurance policies with my loved ones?

Yes, some insurers do allow you to have a combined policy with your partner or children but as there are often detailed health and medical questions asked in the application, each adult would need to be involved in the application process.

13. Is there an age limit to taking out life insurance?

Each policy may have a set entry age or cover limits depending on the age at which you apply for cover. You should read the PDS to understand the eligibility requirements.

14. What can I do if I have further questions on life insurance?

You should do your research, read the specific policy terms, and seek your own financial advice.