Whether you're planning your future, or a life event has prompted you to think about your own mortality, you may find yourself considering some form of life insurance.

Done well, life insurance can be a valuable financial safety net that provides financial security for you and your family.

But paying for a policy you don't need can also eat into your savings. So it's natural to have plenty of questions:

Is life insurance even necessary? How can you find out if you already have life insurance through your super? And when is the best time in life to take out a policy?

It's these questions that we'll tackle in this guide, weighing up the pros and cons to help you decide whether buying life cover is the right decision for you.

Key Points

  • Life insurance can be a financial safety net for your loved ones in the event that you pass away or become terminally ill.

  • Income Protection can protect your income and lifestyle if you're unable to work - even temporarily - due to illness or injury.

  • Life insurance policies tend to be cheaper when you're younger.

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Do I need life insurance?

It's a question that our team at Compare Club hears every day.

The truth is that it's dependent on you and your personal circumstances.

But there's a simple question you can ask that can help you decide if you need life cover: What would happen to my loved ones' finances if I was no longer around tomorrow?

So if you're concerned about the financial impact of an unexpected illness or injury that leaves you unable to work, or if you want to provide financial protection for your loved ones should anything happen to you, then taking out a life insurance policy may be a sensible investment.

How much life insurance do I need?

Once you've decided that you need life insurance, the next challenge is to work out exactly how much you need.

If you don't have time for that right now, here's a basic summary:

  • The level of life insurance you should have is dependent on your situation.

  • Ask yourself how much money would allow you and your loved ones to live comfortably in a worst case scenario.

  • If you're paying off a mortgage or debts, or if you have dependent children, then you may need more cover than someone with very few financial commitments.

Is there a perfect age to get coverage?

There's no perfect time to get life insurance -- it all depends on your individual financial situation.

Again, think about your financial commitments.

Are you about to take out a large mortgage? Get financing on a new car? Planning to send your children to a private school?

All of these are good starting points to think about taking out life cover.

You may also want to consider life cover if you're working in a job where there's a greater chance of injury, such as mining or construction, or if your family has a history of heart disease or cancer.

Think of life insurance as giving you peace of mind that you're protected should the worst happen and you or your family are no longer able to keep up with these financial commitments.

One note: there are upper limits to what age you can take out a new policy.

It varies between insurers and products but is typically anywhere between 59-65, depending on the insurer.

That said, some life insurers will allow you to buy a new death cover policy up to the age of 74.

What is Life Insurance and should I get it?

When most people ask "do I need life insurance?" what they're usually asking is should they get a form of insurance known as life cover, death cover or Term Life Insurance.

This type of life insurance pays out a fixed lump sum to a designated beneficiary -- such as your partner or children -- if you pass away or are diagnosed with a terminal illness.

Life cover may be a suitable option if your main priority is to provide financial protection to your loved ones if you pass away.

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What is trauma cover and should I get it?

Often known as critical illness cover, Trauma Cover pays out in the event of certain types of major injuries or illnesses such as heart attacks and cancer (you can see a more comprehensive list here).

Most of these conditions take some time to recover from and may come with large medical expenses.

This is where Trauma cover kicks in. It provides a financial buffer while you're unable to work, so you could use it to cover the cost of treatment or pay off your mortgage, as well as helping out with day-to-day expenses.

It's different from Total and Permanent Disability (TPD) cover, which covers you in the event your insurer judges you unable to ever go back to work.

What is Total and Permanent Disability Cover (TPD) and should I get it?

Total and Permanent Disability (TPD) cover is life insurance that protects you if you're unable to ever work again due to a serious illness or injury.

This type of cover is often taken out by people who are worried that they'd struggle financially in the event that they suddenly and unexpectedly had to stop working permanently due to a physical disability or a disease such as dementia, and couldn't earn an income.

Talking to one of our life insurance specialists can help you determine whether you could benefit from TPD, trauma or both.

What is Income Protection Insurance and should I get it?

Income Protection Insurance (IP) is different from TPD as it covers temporary illnesses and injuries that (we hope) you'll eventually bounce back from.

It pays up to 70% of your income while you're unable to work and earn a wage.

Income Protection might be a good option if you're fit and healthy but might struggle if you were suddenly injured at work or had a serious illness that lasted for a few months.

Can I bundle multiple policies together?


Combining multiple policies is a fairly common practice and can help you get comprehensive cover affordably by comparing multiple offers from different providers.

Unsure what to do? Read our guide on how to combine multiple life insurance policies.

What is unclaimed life insurance and how does it reach that status?

Life insurance usually reaches unclaimed status when the person who took out the policy passes away and the insurance provider isn't notified.

This tends to happen when none of the person's relatives were aware that a policy existed, or in cases when the person had no living relatives.

We go into this in more detail in our guide to life insurance beneficiaries.

How do you know if you have life insurance?

This might seem like a strange question but many Australians are unaware that there's a default life policy bundled into their superannuation.

This is often death cover, or a specific type of TPD.

It's worth checking what the policy in your super covers you for, how much you're paying, and what exclusions it has around claiming.

Life policies in super can vary wildly and some only offer a limited form of cover. Government body ASIC has even described some default super policies as junk.

This doesn't mean all super policies are bad.

They're more likely to be suitable for younger, healthy Australians on a limited budget.

But if you're not sure your super will cover you for what you need, then speak to one of our specialists to discuss your options.

Where can I get the best life insurance?

There's no such thing as the best life insurance.

Each person will have different needs.

But there are a lot of companies that offer life insurance, which can make it tricky to know if you're looking at the best policy for you.

That's why we're here.

Our specialists at Compare Club compare policies from 10 of Australia's leading insurers and can provide general information to help you find a deal that's truly right for you.

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References ASIC, Default insurance in superannuation, Dec 2020 ASIC, Holes in the safety net: a review of TPD claims, Oct 2019 This guide is of an informative nature only and not representative of Compare Club products. It should not be taken as medical or financial advice. Check with a financial professional before making any decisions.