Term Life Insurance

Chasing a term life insurance policy? Compare deals with Savvy and get the best offer today.

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, updated on July 19th, 2023       

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Life Insurance

We’ve partnered with Compare Club to bring you a range of life insurance policies to help you compare them side by side.

Term life insurance can serve as an important financial safety net for you and your family if you die or are diagnosed with a terminal illness. Regardless of how much cover you’re looking for or your individual life situation, it’s important to consider a range of offers on the market before diving into your purchase, as doing so can help maximise your chances of finding one suitable for your needs.

You can compare term life insurance policies from a panel of Australia’s top insurers through Savvy today. By getting a quote through us, you can consider real-time price estimates and compare a range of features to help you get the most out of your cover. Start the process with us and get a free online quote today.

What is term life insurance and how does it work?

Term life insurance is simply another name for life cover or death cover. Should you pass away or be diagnosed with a terminal condition, term life insurance can provide your specified beneficiary with a lump sum payout. This payout may help you cover some everyday living costs, such as mortgage repayments, credit card bills and general day-to-day expenses. It can also help you fund payments you’re expecting to make in the future, such as high school fees.

As its name suggests, a term life insurance policy can offer cover for a limited period, which may be between ten and 30 years or when you reach a certain age, such as 85. Within this window, you or your beneficiaries can file a claim and, if green-lit, receive a payout if you die or are diagnosed with a terminal disease. However, outside the covered term, you won’t be covered and will need to pay for any associated expenses out of pocket.

How much does term life insurance cost?

Term life insurance policies don’t have a single ballpark cost to follow. Instead, how much you pay is determined by a set of factors which are relative to your own personal circumstances. Some of the important factors which help determine how much your insurance costs include:

  • Age: your life insurance premiums will be more expensive the older you are, as your risk of terminal illness and death increases as you age. It’s crucial to think about being covered while you still can, as insurers have entrance age limits for new policyholders. For example, if you’re over the age of 60 or 65, not all policy options and insurers will be able to offer cover, though some may be able to cover those up to 75 (depending on your insurer’s terms and conditions and the type of policy you’re looking for).
  • Stepped or level premiums: it’s also to keep in mind that the cost of your policy can differ depending on whether you’ve chosen stepped or level premiums. While choosing stepped premiums means the cost of your policy will start lower and rise as you grow older, selecting level premiums means your premiums will only be affected by inflation, but will otherwise remain consistent.
  • Smoking or non-smoking: smokers can pay more than double for their life insurance compared to someone who doesn’t smoke cigarettes, use a vape or any nicotine other nicotine products. This is because of the increased risk attached to developing illnesses, such as lung cancer.
  • Employment: not all professions are equal when it comes to determining the cost of your term life insurance. For instance, for those which put you at risk of illness or injury, such as working at great heights or exposure to dangerous substances, you’re likely to pay more for your policy. This means life insurance for a builder may cost more than for an office worker, while other professions, such as firefighters, may not be able to access coverage (although this will depend on their profile and the terms and conditions of their insurer).
  • Health: all aspects of your health will be investigated by the insurer, who will use this information to help set your premium depending on the level of risk posed by covering you. In some cases, you may need to submit to a medical exam or blood test to check your health. However, the questions and requirements of various insurance companies tend to vary. Insurers can also consider your family’s medical history if there’s a pattern of inherited disorders, even if you aren’t suffering from such as condition right now.
  • Coverage amount: your premiums vary depending on how much coverage you choose, so it’s crucial to get an appropriate amount. Consider how much your family may need to get by after you pass away or become incapacitated. For example, if you have no dependent children or major liabilities and your partner works a high-paying job, you may not need to pay for as great a payout as someone who has a high number of dependents in their life.

What are the differences between term and whole of life insurance?

For many years, Australians had the option of taking out a whole life insurance policy. These were popular until they were phased out in the early 1990s upon the introduction of compulsory superannuation. As such, they’re no longer available to new customers. However, some of the ways term and whole life policies differ include:

Term life insurance

  • Comes with a used-by date: term life insurance policies expire after a set period or when you reach a certain age.
  • Cheap: premiums are usually cheaper because your coverage period is capped.
  • Youth-oriented: these policies are more geared toward those who want cover while they are raising children or have dependents. This allows their loved ones to have money to continue to put their children through school and keep up with other necessary household payments.
  • Choice of premiums: you can select whether to pay stepped or level premiums as part of this type of cover.
  • Choice: you’ll usually get your choice of policy, whether it be life cover, TPD, income protection or trauma insurance. This offers a greater selection of policies to help you more accurately determine which suits your needs.

Whole life insurance

  • No expiry date: whole life insurance policies only expired when you passed away or chose to cancel your insurance.
  • Higher premiums: when these policies were available, a lifetime of coverage would cost individuals more than what a term policy does today.
  • Seniors-friendly: these policies were better suited to seniors and those over 50 who wanted to leave money behind to cover funeral expenses or allow their children an inheritance.
  • Flexibility with your sum insured: unlike life insurance today, whole life cover came with a savings component known as a cash value. This enabled you to withdraw, invest or borrow against your covered amount.
  • Lack of choice: unlike a term life insurance policy, these didn’t provide you with the choice of taking out other forms of life insurance, whether it be TPD or income protection.

Types of life insurance

Why compare life insurance through Savvy?

Pros and cons of term life insurance

PROS

Gives you flexibility

You can choose to increase or decrease the amount you pay for your life insurance and the size of your payout at any time during your term. This gives you flexibility if your life situation changes and you wish to increase or decrease your sum insured.

Affordable premiums

Because you’re not paying for the cash value of your policy as you would on a whole life deal, your life insurance premiums can be cheaper.

Tax-free benefits

If you die or sustain a life-changing injury, the benefit you claim on your life insurance may be tax-free.

Renewable insurance

One of the benefits of term life insurance is that you can renew your policy right up until very old age, sometimes even if you’re well into your 90s, if you purchased it before your insurer’s age cut-off.

CONS

Age limits

Term life insurance policies can come with cut-off ages of between 65 and 75 when applying for a policy, which is in line with the age that most people retire.

Temporary cover

This type of coverage is only temporary, meaning you’ll have to renew your coverage until you pass away or reach your insurer’s expiry age.

Not all applicants may qualify

When first applying for life insurance, you may be required to complete a medical exam, which could include supplying blood and urine samples. If your current health situation doesn’t meet your insurer’s requirements, you may be denied coverage (though exams aren’t always required).

Some frequently asked questions about term life insurance 

How do I compare term life insurance?

When you’re comparing your options through Savvy, there are a few factors you’ll need to consider, including:

  • The cost of your premiums
  • Level of coverage you want
  • The type of life insurance you need (for example, you may want a TPD or trauma insurance policy)
  • Inclusions and exclusions
  • Waiting periods (these can vary between two weeks and two years)
Can I take out this type of cover through my super fund?

Yes – most superannuation funds across Australia will offer life, TPD and income protection insurance policies. While these cover options can seem quick and convenient, it’s a good idea to compare your options before committing to a policy to help ensure you’re taking out the most suitable coverage. You can compare offers with Savvy to help you determine which term life insurance policy is best for you from our partner’s panel of trusted insurers.

Are my premiums tax-deductible?

If you purchased a total and permanent disability (TPD), critical illness or life insurance policy outside of your super fund, you won’t be able to claim a tax deduction. However, term life insurance and TPD insurance purchased through your superannuation, as well as income protection insurance purchased inside or outside of super, may be able to be claimed as a deduction. If purchased through your super, your fund will generally claim these for you.

Can I get cover if I have a pre-existing condition?

This is different from provider to provider and dependent on the nature of your pre-existing condition. Some insurers may offer cover for your condition if you meet certain requirements, such as having not received treatment for five years, while others may charge an additional loading to include it under your policy. However, in some cases, it may be excluded from your coverage entirely. Be sure to check with your insurer before you buy to determine whether your condition can be covered.

Am I covered if I am outside of Australia?

Many life insurance policies offer worldwide cover, meaning you can still receive your payout if you’re injured, die or get seriously ill overseas and the circumstances meet their eligibility requirements. Check with your insurer to determine whether you can be covered overseas and find out the incidents where you may not be covered, such as travelling to a warzone.

Will I be covered if I make a claim related to COVID-19?

In most cases, life insurance companies will cover you if you’re struck down or die as a result of a COVID-19 diagnosis. However, it’s always worth confirming with your insurer if you’re unsure about what you can be covered for. If you’re still recovering from COVID-19 or are experiencing symptoms which are yet to be confirmed by a test result, you won’t be able to purchase a new life insurance policy.

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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.