Benefits of Life Insurance

Find out some of the key benefits of life insurance right here with Savvy.

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, updated on July 10th, 2023       

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Life Insurance Banner - Parents playing with their children next to their parked car

Taking out life insurance is a big step to take to ensure you and your family will be covered should you pass away, fall ill or are injured due to an included event. Before you sign up for coverage, however, it’s worth familiarising yourself with some of the key benefits of taking out a policy, which you can do right here with Savvy today.

What are the benefits of life insurance?

Life insurance comes with a wide array of benefits, which are important to weigh up if you’re deciding whether to purchase a plan. Some of the main advantages of life insurance to consider include the following:

Provides peace of mind to you and your family

Perhaps the biggest reason why life insurance is important is that it provides security to you and your family that they’ll be able to make ends meet if you pass away or become unable to work due to a covered event. Many families rely either largely or entirely on a single breadwinner, so the threat of serious injury, illness or death could lead to serious concerns that household expenses and other debts such as mortgage repayments may not be manageable without them.

However, with the backing of a life insurance policy, they can rest easier in the knowledge that there would be protections in place to ease any financial burdens which may be present if a claimable event occurred.

Range of different insurance types available

One of the beauties of life insurance is that there are many different types of coverage available, all of which serve their own purpose. Life cover is the standard type of policy which offers a payout for death or terminal illness, with some insurers not setting a maximum payout, but you can also choose any of the following:

  1. Life cover: can provide a lump sum payout in the event the life assured passes away or is diagnosed with a critical illness.
  2. Income protection: can provide you with an ongoing benefit if an injury or illness renders you temporarily unable to return to work. This may be worth up to 70% of your monthly income, subject to your insurer's terms and conditions.
  3. Total and permanent disability (TPD): can provide you with a lump sum benefit if an accident or illness causes you to become permanently disabled and unable to work either in your existing job or any job relevant to your education, experience or training (depending on what cover you choose).
  4. Trauma: can provide you with a lump sum benefit if you’re suffering from a critical illness or sustain a critical injury. You can opt for an insured amount of up to $2 million with certain insurance providers.

It's important to note that all coverage is subject to your insurer's terms and conditions, so check your product disclosure statement (PDS) if you're unsure about what is and isn't covered under your insurance.

Flexible coverage

Life insurance policies are designed to be based on you and your health profile, meaning the coverage you receive can reflect your specific needs (provided you satisfy your insurer's eligibility requirements). You may be able to bundle two or more of the policies mentioned above into your overall life insurance package, meaning you can pick and choose between the types of insurance and levels of coverage you qualify for to suit you and your family. You’ll also be able to choose between stepped and level premiums in line with whichever way you prefer to pay for your policy.

May be available for all ages, from children to seniors

Some life insurers offer a broad age range for lives assured, which you may be able to take advantage of. If you’re a parent, you may be able to add cover for your child to your life insurance policy to help ease the financial burden should they fall critically ill. Additionally, the age limits set by insurers may allow seniors as old as 75 to purchase policies and be covered up to the age of 100 and beyond. Of course, whether you can be covered up to these ages as a senior will depend on whether your general health and other factors meet your insurer's requirements.

Are there any drawbacks to life insurance?

While there’s a range of benefits to consider when purchasing your life insurance policy, there are also several disadvantages which you may wish to account for before choosing your insurer. Some of these include:

  1. Not always cheap: life insurance premiums are based on risk, meaning those who are considered high-risk individuals will likely pay more for their policy if they're able to access cover. This could be for a variety of reasons, such as if you’re a smoker, a senior, are suffering from a pre-existing condition or have a family history of a particular major illness, as well as if you’re working in a job or industry which poses more health risks.
  2. Not all policies are indexed: life insurance indexation is essentially the process of incrementally increasing your covered amount in line with inflation and the cost of living. If your policy isn’t indexed, it could mean your family is left without sufficient funds in comparison to the cost of living (though many insurers offer inflation protection on their insurance packages to combat this).
  3. Exclusions still present: not all causes of death, illness or injury are covered by life insurance. For example, death by suicide within the first 13 months of your policy’s coverage generally won’t be included, nor will anything occurring overseas in a country with government travel warnings attached or if you’ve broken the law. Be sure to familiarise yourself with policy exclusions before you buy.

How to compare the benefits of different life insurance policies

Frequently asked questions about life insurance benefits

What are the benefits of term life insurance compared to whole life cover?

Term life insurance offers protection for a set period, typically between ten and 30 years. However, whole life insurance, which offered protection for the entire life of the policyholder, is no longer offered by insurers on the Australian market. This is largely because the need for the surrender value it came with was effectively replaced by compulsory superannuation.

What are the benefits of life insurance inside super?

As cover offered by your super is part of a group insurance policy, it’s generally cheaper than purchasing a separate policy. Additionally, coverage is often automatic, meaning it’s more convenient and lower effort, as well as the fact that your premiums can be claimed as tax deductions by your insurer. However, it’s also important to consider the drawbacks of super life insurance, namely that they generally come with lower payout limits and are deducted from your super balance.

Is it better to buy life insurance when you’re younger?

The main benefit of getting life insurance when you’re 30 or over is that you're likely to qualify for cheaper premiums than if you were older, such as over 50 or 60. However, if you plan to still have life insurance when you're older, your premiums will still be higher at that point (if you elect to pay stepped premiums).

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Compare life insurance policies side-by-side

Through Savvy, you can consider a range of competitive life insurance policies from reputable insurers, whether you're after life, income protection, trauma or TPD cover. Get the ball rolling on comparing your available options today!

Disclaimer:

Savvy is partnered with Compare Club Australia Pty Ltd (AFS representative number 001279036) of Alternative Media Pty Ltd (AFS License number 486326) to provide readers with a variety of life insurance policies to compare. Savvy earns a commission from Compare Club each time a customer buys a life insurance policy via our website. We don’t arrange for products to be purchased from these brands directly, as all purchases are conducted via Compare Club.

Savvy does not compare all life insurance policies or providers currently operating in the market. Any advice presented above or on other pages is general in nature and doesn’t consider your personal or business objectives, needs or finances. It’s always important to consider whether advice is suitable for you before purchasing an insurance policy.

For any further information on the variety of insurers compared by Compare Club or how their business works, you can read their Financial Services Guide.