Types of Life Insurance

Find out more about the different types of policies available in Australia with Savvy today.

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, updated on July 19th, 2023       

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

Far from just a single product, life insurance is more of an umbrella term which covers many different and unique policies. With so many different types of life insurance available from a wide variety of insurers, it’s important to take the time to consider your options to help you determine which may be most suitable for you and your family. 

You can find out more about what types of life insurance are available for you in Australia right here with Savvy. Learn about the differences between these policies and the areas in which each can offer cover in our comprehensive guide today.

What types of life insurance can I purchase? 

When buying life insurance, it’s important to understand the differences between the various types of coverage. The main forms of life insurance you’ll be able to purchase include:

Life cover

Having life cover can offer protection to you and your family financially in the case of your death or a terminal illness diagnosis. Taking out life insurance coverage may be important if you have a mortgage and other financial and family commitments, such as supporting a family with a partner and children. A life insurance beneficiary is often yourself, your spouse or partner or your children.

Total and permanent disability (TPD) cover

Permanent disability due to an injury or illness can be a significant emotional blow which can strain one's ability to make ends meet if it prevents you from returning to work. In addition, medical expenses and house alterations can be costly, especially if you're no longer working. TPD coverage can be beneficial in helping you cover some of these costs, with policies designed specifically to help both those who are unable to return to their current position or individuals who are no longer to complete any work relevant to their education, experience or training.

Income protection insurance

A person's capacity to make a living is one of their most valuable assets and income protection helps to secure that if an accident or illness leaves you unable to work for an extended period. It can help partially replace the income you would have made if you were still at work. For a few months up to five years or the age of 65 (depending on your insurer’s terms and conditions), those who apply for coverage may be able to receive up to 70% of their income as an ongoing benefit.

Trauma cover

Trauma insurance is designed to assist you and your family financially when dealing with a significant health issue, such as a critical illness or major injury. Insuring yourself against such trauma can offer cover for conditions which may require extensive medical care, a long recuperation or rehabilitation period or considerable adjustments to your daily routine. This can include potentially life-threatening illnesses such as cancer, heart conditions and strokes.

What elements can impact the cost of my life insurance?

There is no universal rule of thumb for determining the cost of your insurance policy. Some of the factors which can influence it include:

  • Age: the primary factor in what you'll pay for your premium will likely be your age. Expect to pay a more significant premium if you're over 50 or a senior compared to a younger policyholder. This is because insurance companies are more likely to pay out on your coverage if you are older.   
  • The policy you choose: life insurance premiums are quite variable and will be based largely on the policy you select and the insurance company you choose. Although premiums are typically calculated using the same set of factors across providers, they can vary widely depending on who you choose for your cover. That's why it's wise to compare through Savvy and analyse a range of options to help you choose the most cost-effective plan that still meets your needs in terms of protection from our panel of insurers.
  • Medical history: insurers may occasionally request that you get checked out medically or look over your medical history to identify any pre-existing problems. As well as looking at your weight, blood pressure, and cholesterol, they may also ask about your family history of conditions such as heart disease or cancer. These factors increase your risk profile, meaning they can result in costlier premiums.
  • Your job: some jobs are considered riskier than others, such as police officers and some performed at high altitudes. Your insurer will look into your past work if you apply for life insurance. Insurance premiums will generally be higher for you if you’re regularly exposed to potentially harmful chemicals or tasks as part of your profession, as opposed to, say, an office worker.
  • Smoking: due to the increased likelihood of contracting cancer and other ailments, the cost of a life insurance policy for a smoker can be twice that of a non-smoker. All tobacco and nicotine products, including cigarettes, e-cigarettes, chewing tobacco, cigars and patches, can fall under this category.
  • Genetic illnesses: if there’s a history of genetic problems in your family, your life insurance rates may be higher even if you don’t have any pre-existing health concerns. Disorders of this kind can range from cancer to haemophilia and more.

Types of life insurance

Why compare life insurance through Savvy?

How can I compare life insurance policies?

Frequently asked questions about types of life insurance

Can I bundle different types of life insurance together?

Yes – most life insurance companies will allow you to combine your policies to make it easier to manage them and save you time rifling through paperwork. Bundling your policies is also generally cheaper in the long run, though it’s important to compare your options carefully to determine what may be the most affordable and suitable option for you.

Are there different age limits on these life insurance policies?

Yes – different policies have different age limits attached to them. These age limits apply to when you can purchase a policy and how long you’re able to be covered by one. Eligible age limits include:

  • Life insurance: depending on who you buy through, the cut-off for buying your first life insurance policy can be between 60 and 75 years old. Once you've purchased it, you can be covered up to the age of 100 with some insurers (subject to eligibility criteria and terms and conditions).
  • Income protection insurance: you can generally purchase your first policy if you’re under 60 and your cover can typically last until you’re 65.
  • Trauma insurance: as long as you’re under 65, you can buy one of these policies. You’ll generally be covered up until you reach the age of 70.
  • TPD insurance: cut-off ages can vary from as young as 60 up to 75 with select insurers, but this varies depending on who you buy through. In some cases, you may be covered up to the age of 100 (provided you meet your insurer’s requirements)
Do these types of life insurance cover me if I’m overseas?

In most cases, life insurance will cover you if you’re travelling overseas and you either die, get gravely sick or are critically injured. The only time you wouldn’t be covered is if you knowingly travelled into a country that was either experiencing a natural disaster or flagged by the Australian government with a ‘do not travel’ warning.

Can I get a life insurance policy for my child?

Many life insurance companies offer optional coverage for children as an add-on to an adult policy. This can cover children if they’re critically ill or injured or pass away suddenly. You can purchase child cover from the moment your son or daughter is born and they can be covered until your insurer’s cut-off age, which can vary from 18 to 21 (or older in some cases). Once they reach the cut-off age, the policy can transition into an adult one.

Does the claims process differ with different types of life insurance?

Not particularly – most insurance policies follow the same formula when it comes to allowing you to make a life insurance claim, including submitting a claims form and providing documents that can support your version of events such as medical reports.

Can I choose who receives my payout?

Yes – you can nominate whoever you wish to be the beneficiary of your life insurance payout should the worst happen. This could be a spouse, children or another family member or close friend. It’s worth remembering that children who are named as recipients of life insurance payouts generally need to be 18 years old to receive the money. If they aren’t 18 at the time you pass away, the money is held by a legal trustee until they are of age.

What’s the difference between term and whole life insurance?

Term life insurance covers you for a fixed period between ten and 30 years or until you reach the age of eligibility, while a whole life insurance policy gave you a lifetime of cover. Term life insurance is universally available in Australia, while whole life insurance was phased out in the 1990s after the introduction of compulsory superannuation in Australia.

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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.