Why is Life Insurance Important?

Find out some of the key reasons why life insurance is important to consider right here with Savvy.

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, updated on July 10th, 2023       

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Life insurance is a crucial financial tool which can provide a safety net for your loved ones in the event of your death, illness, injury or permanent disablement. It’s an important consideration for anyone with dependents or significant financial obligations, such as a mortgage or other debt.

You can explore some of the key reasons why life insurance is important and how it can benefit you and your family right here with Savvy. Consider the key benefits and disadvantages before you buy your policy so you can determine whether life insurance is worth it for you (and what type of cover this may be) with more confidence.

Why is life insurance important to have?

Life insurance can help you protect the financial future of your loved ones in the event of your death. Some of the benefits of life insurance and why it’s important include:

  • Can provide financial security: the primary reason for having life insurance is to provide financial security for you and your loved ones after your illness, injury, disablement or death (provided it qualifies for coverage through your insurer). The proceeds from your life insurance policy can be used to cover expenses such as funeral costs, outstanding debts, mortgage payments and living expenses.
  • Pays off debts: if you have any outstanding debts such as a mortgage, credit card balances or a car loan, life insurance can be used to pay them off so your family isn’t burdened with the debt after you're gone.
  • Protects your family’s lifestyle: life insurance can also be used to replace your income and maintain your family’s lifestyle in case of your death or if you’re unable to work either permanently or for an extended period. It can help ensure your family has enough money to pay for everyday expenses such as food, clothing and education.
  • Provides peace of mind: knowing your loved ones can be financially protected should a covered event take place can provide you with greater peace of mind. You can rest assured they can be taken care of even if you're no longer there to provide for them.
  • Affordable: life insurance may be an affordable way to protect your family’s financial future. However, the cost of your policy will depend on a range of factors relating to your profile, as well as the insurer and type of policy you choose.

How do I find the best life insurance for my needs?

When choosing your life insurance, it’s important to take the time to consider a range of factors to help you work out which may be the best for your needs and those of your family. Some of these factors include:

  • Determine your coverage needs: think about how much coverage you need based on your financial obligations and what your family may require for support without your income, such as mortgage payments, children's education and other debts.
  • Consider the types of policies available: there are several types of life insurance policies, such as life cover, trauma cover, income protection cover and total and permanent disability (TPD) cover. Each has its own pros and cons, so it's important to understand the differences to help you make an informed decision.
  • Compare policies from different providers: once you have a good understanding of your coverage needs and the types of policies available, you can start shopping around for the best deal. Compare policies from different providers to find the best value for your money, which you can do right here through Savvy.
  • Look for additional benefits: some life insurance policies come with additional benefits or special deals, such as discounts or added features such as advance payments or inflation-proofing. Consider whether these benefits are important to you and factor them into your decision-making process.
  • Think about your budget: it’s all well and good to know what insurance you need and the amount of coverage necessary for your family, but it’s crucial for your premiums to fit within your budget. If insuring yourself for more than you need puts strain on your budget, it may not be worth it.

Frequently asked questions about life insurance and why it’s important

What’s the difference between stepped and level premiums and why are they important?

Stepped premiums are initially cheaper and increase as you get older, while level premiums remain the same throughout the policy (aside from inflation increases). Stepped and level premiums are important to consider because they affect the cost of your life insurance policy both month-to-month and overall, so it’s crucial to consider which may be better for you.

Why is life insurance important if I’m a senior?

Life insurance is just as important for seniors to help cover expenses, such as funeral costs or outstanding debts, and to provide financial support to loved ones, such as a dependent partner or as part of your estate to be divided among your children or grandchildren.

Can I buy life insurance if I have a pre-existing condition?

It may be possible to buy life insurance with a pre-existing condition, but it may come with higher premiums or more exclusions related to the condition. It's important to shop around and compare policies to find the option most suitable for your needs.

What factors can impact the cost of my life insurance policy?

The cost of your life insurance policy can be impacted by factors such as your age, health, lifestyle, occupation and the amount and type of coverage you need. It’s crucial to disclose all relevant information to the insurer to avoid the prospect of having your claim rejected based on undisclosed lifestyle or health factors. However, it’s just as important to shop around, as the difference in policy costs can be as simple as coming down to different insurers.

Helpful life insurance guides

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Life Insurance Exclusions

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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.