Comparing whole life insurance with standard life cover

Matthew Lang

Matthew Lang

Updated 15/04/2021

Whole life insurance is no longer sold in Australia. Term life insurance is now considered a popular alternative and more affordable. Find out why.

Comparing whole life insurance with standard life cover

Is whole life insurance sold in Australia?

Key Points

  • Whole life insurance was phased out when compulsory superannuation was introduced in 1992.

  • Whole life insurance contracts are no longer sold in Australia -- term life insurance is now the main alternative.

  • Term life insurance is considered more affordable than whole life insurance.

Whole life insurance was popular in the '70s and '80s in Australia and commonly used as a way to save for retirement.

But when compulsory superannuation was introduced in the '90s, insurers stopped offering this type of cover.

You may still hear the term being thrown about, which is why you've probably ended up on this page if you've been searching for anything to do with whole life insurance.

Let's take a look at what this type of life insurance offered and what type of similar insurance is available today.

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What was whole life insurance?

Whole life insurance did what its name suggests - it covered people for their entire lives.

It was also known as permanent whole life insurance or cash value life insurance and was similar to universal life insurance in America.

Before the introduction of compulsory superannuation in 1992, many people used their whole life to save for retirement.

They'd give up their policy when they retired to access its cash value. If the policyholder passed away, their beneficiaries would get a payout.

How did a whole life policy work?

Whole life insurance paid a death benefit, but also had a savings component called the "cash value".

This could be invested, withdrawn or borrowed against.

To get hold of the cash, you'd need to request a withdrawal of funds or a loan.

Loans that were unpaid reduced the death benefit by whatever was still outstanding to pay, while withdrawals reduced the cash value but not the death benefit.

Why is whole life insurance no longer available in Australia?

Confidence in these types of policies was already beginning to dwindle even before 1992.

Inflation had impacted the benefit amounts that were paid out and increased living costs meant the overall payout stopped being enough for a comfortable retirement.

In 1992, super was made compulsory to ensure all Aussie workers had enough money for their retirement.

That change to life savings meant many life insurers began to offer a more affordable alternative called term life insurance.

Will whole life insurance ever come back?

It's unlikely. At this stage, there are no plans to re-introduce this type of insurance back into the Australian market.

What are the alternatives?

You can get life insurance through your superannuation or you can buy a standalone term insurance policy.

Term life insurance, also known as life cover, death cover or simply life insurance, will be familiar to many Aussies.

It pays a lump sum to your beneficiaries if you die or get diagnosed with a terminal illness, and generally offers a larger death benefit than the life insurance most of us have through our super funds.

It can get a bit complex but there's a number of reasons why people may choose to buy term life cover.

  • Life insurance through your super is often one-size-fits-all and can have a lot of exclusions.

  • Standalone term policies often offer more comprehensive cover.

  • Standalone policies are paid out-of-pocket, not through retirement savings.

  • Payouts through super funds have to meet the fund's conditions of release.

There are also three other types of life insurance that can be purchased with term cover or as standalone policies:

Income Protection

Income Protection

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

There's quite a few differences between the two, which you can see in the table below.

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

Whole Life insurance

Term life insurance


More expensive because of its investment component

Cheaper than whole life policies


Cover for the entire life, as long as premiums were paid.

Covers you for a specific length of time.

Death Benefit


Not guaranteed, if you die outside of the policy term, your beneficiaries don't get a payout.


Not flexible if you wanted to change your cover

Flexible, with the option to increase or decrease cover without needing medical evidence


Level premiums only

Level or stepped premiums


Premiums tended to stay the same regardless of inflation.

Insurers may increase your premiums to keep up with inflation (this is optional in most cases).

Features and benefits

Had a cash value component, paid as a lump sum if you cancelled your policy.

Greater range of features that you can tailor to suit your needs, you can also link term life with other types of life insurance

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How long should I take out life insurance for?

It's important to find the sweet spot for a term length that means you can still afford your premiums while making sure your family won't be financially burdened when you're gone.

If you're a new parent, for example, you probably want a policy that covers the amount of time your child will be financially dependent on you.

That can be anywhere from 20 to 30 years.

New homeowners, on the other hand, might want to consider a 30-year term, since that's likely how long your mortgage will last for.

What should I do if I still have whole life insurance?

If you took out a policy before 1992, you can continue to be on it as long as you keep paying your premiums.

Your other options are to cancel the policy and take the cash value or keep the death benefit for a shorter period.

If you'd like to switch to term life insurance, we're here to help you compare insurers and find a price that fits your budget.

How much does life insurance cost?

The level of cover you need and how much your premiums are really depend on your circumstances and what stage of life you're at.

Before pinning down a benefit amount, have a think about what costs your family may need to cover if you're no longer around.

These could include mortgage repayments, school fees, loan repayments and funeral costs.

You should take stock of your current finances, too.

The more debt and expenses you have, the more cover you'll probably need.

Where can I buy alternatives to whole life insurance?

That's an easy one -- through Compare Club. We'll help you compare your life insurance options from our panel of trusted insurers.

While whole life insurance was popular for its investment and cash value benefits, today's alternative of term life insurance is much more affordable, plus it gives you the reassurance of knowing your family will be looked after when you're gone.

Compare and buy term life insurance with us and you'll also have the reassurance of knowing you're on the best deal available.

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The information contained in this guide is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. As such, it is important that you consider the appropriateness of any advice and the relevant product disclosure statement (PDS) before proceeding. Check with a financial professional before making any decisions.

Matthew Lang is the general manager of life insurance at Compare Club. Matthew leads a team of dedicated professionals who are passionate about helping individuals and families make informed decisions about their life insurance needs. Whether it's finding the right coverage for your specific circumstances, comparing policies, or optimizing your existing policy, Matthew and his team are here to provide expert guidance and support.

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Matthew Lang

General Manager of Life Insurance