Do You Need Life Insurance?

Personal insurance is worth considering if you tick the following kind of boxes:

  • You have dependents
  • You have debts or loans, such as a mortgage
  • Your income pays for your dependents' living expenses
  • You don't have enough assets to service all loans and expenses

If, for example, your children are self-sufficient, or your partner could get by on their income or assets, you may decide against taking out life insurance — or opt for a smaller benefit.

Similarly, if you're approaching retirement, or are close to paying off your mortgage, you might consider a shorter-term life insurance package.

What types of life insurance are there?

Australian life insurance has three major options:

  • Term life insurance. This is the main type of life insurance offering a lump sum should you die. It usually expires at age 99, and premiums become increasingly expensive as you get older. Check out the best term life insurance deals.
  • Select term life insurance. You nominate a fixed term for the life insurance (5, 10 or more years) to cover, for example, the time until you'll pay off your mortgage, or your children should be moving out of home.
  • Money-back term life insurance. Similar to 'whole of life insurance' (which isn't available in Australia), money-back term life insurance pays out the sum of your premiums upon the expiry of your policy if a benefit hasn't already been paid. So you'll receive a payout if you outlive your insurance.

Your premiums can also be structured either as 'stepped' or 'level' payments.

  • Stepped life insurance premiums. The more popular of the two options, stepped premiums increase as you get older (and presumably become a higher risk). This can be a good option if money's tight now and you expect to earn more in future.
  • Level life insurance premiums. Level premiums stay at the same cost until you're 65, which means they'll be higher than stepped premiums to begin with, but will save you money over the long term. If you're taking out life insurance over the long term (usually 10 years or more), and can afford the higher premiums upfront, this could be the cheaper life insurance option.

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