Your checklist when buying a life insurance for the first time

Published on December 4th, 2020
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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Especially if you’re the breadwinner of the family, you may feel like it is your responsibility to make sure that they are protected and taken care of in the eventuality of your untimely demise. So, what should you look out for when buying life insurance for the first time?

Ask questions

When shopping for such an important – and expensive – service, you need to clarify any misunderstanding you may have. Ask questions about the type of coverage, beneficiaries, the conditions in which they receive the money, type of payments and anything else you want to know.

Be honest

You will notice something called Duty of Disclosure, which means you need to be honest with your insurer about the risks in your lifestyle, the state of your health, hereditary illness, etc. If you lie or fail to disclose something, your beneficiary may face repercussions in the future, including the inability to claim the insurance.

Make sure you have the right kind of coverage

As you may already know, there are different types of coverage for different needs. The most well-known kind of life insurance coverage is the lump sum paid to the beneficiary in the case of the insured person’s death. This sum can amount to about $1.5 million. However, there are other options, such as funeral cost coverage, which helps the family with the financial aspects of the funeral, and terminal illness coverage, which can kick in in the case of a life-threatening illness with a life expectancy of less than a year.

Look for premium reductions

Did you know that you are entitled to some reductions? Of course, they come under certain conditions, generally related to lower risk. For example, the younger you are, the lower your premium will be because you are less likely to suffer from life-threatening illnesses. Your lifestyle is also a concern, so if you regularly engage in risky behaviour, you may want to make a change.

Choose between level premiums and stepped premiums

Not all premiums are created equal, and you have to choose the one that makes more sense for you and your lifestyle. While level premiums do not change over the course of your life, they are higher to begin with. Depending on your financial situation, especially if you are young and/or just out of university, that may be a problem.

A stepped premium increases over time, but it starts out at a lower rate. That can benefit someone who isn’t in a great financial situation in the present, but it relies on an understanding that their income will increase in the coming years. Keep in mind that while this may be true, there is also retirement to consider.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

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.

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