Life cover
A plain-English guide to what life cover pays, who it's for, and what to think about before you enquire.
Quick answer
Life insurance is a contract between you and an Australian life insurer. You pay a regular premium. In return, the insurer pays a lump sum to the people you nominate if you die during the period your policy is active. The lump sum is called the sum insured. Most Australian policies also pay on terminal illness diagnosis. Cover can be held inside superannuation, outside super, or both.
What life insurance covers
A life insurance policy in Australia typically pays out in two situations: death from any cause (subject to exclusions), and terminal illness diagnosis. Actual policy terms vary by insurer. The product disclosure statement and policy schedule are the source of truth.
Typically included
Typically not included
Australian consumers typically choose from four common cover structures.
The standard product. You pay a premium. The insurer pays the sum insured if you die during the term. Most Australian policies are written as renewable annual cover, with a maximum age. This is the default cover type quoted by most insurers and held inside most super funds.
A historical product where premiums build a savings component alongside cover. Whole-of-life policies are largely closed to new business in Australia. Most consumers today only encounter them as legacy policies inherited from a parent or held since the 1980s or earlier.
A policy covering two people (typically a couple) under one contract. The sum insured pays out on the first death, after which the policy ends. Joint cover is less common today than two separate single-life policies. The reason is flexibility: separate policies pay out independently, can be cancelled independently, and follow each person if the relationship changes.
Most super funds provide some default life cover to their members. This is group cover: the fund holds a master policy with an insurer, and members receive a slice of cover based on the fund's terms. Underwriting at the group level is light, which means default cover is often available without medical questions. The cover amount is usually modest and may not scale with your salary or family situation.
Cover held inside super is funded by your super balance. Cover held outside super is paid from your bank account or credit card. Each route has different tax, premium, and beneficiary implications.
The decision is one of the most common questions people ask about life cover in Australia. There's no single right answer. Each route has trade-offs.
Inside super. Cover is paid for from your super balance, not your take-home pay. Premiums are typically lower than equivalent retail cover because group underwriting is lighter. Tax outcomes differ inside and outside super and depend on the fund, the beneficiary and the benefit; premiums paid from super also reduce retirement savings. Cover limits are usually modest. Beneficiary nominations follow super law, which means a binding nomination is needed for the lump sum to land where you intend.
Outside super. Cover is paid for from your bank account. Premiums are typically higher because underwriting is individual and limits are larger. Beneficiary nominations are more flexible. Tax-deductibility is generally not available for life cover premiums outside super.
Both. Many Australians hold a mix: default super cover for the cash-flow benefit, plus separate outside-super cover to top up to a level that matches actual debts and dependants.
Inside-super and outside-super cover differ in how premiums are funded, who owns the policy, the features available, and how benefits reach beneficiaries. Which structure suits a given household is exactly the kind of question a licensed practitioner works through.
Australian life insurance premiums are priced individually for each applicant. Five factors typically drive the price.
Stepped premiums rise each year as you age. They start lower and end higher. Level premiums start higher and can work out cheaper if the policy is held long-term: whether they do depends on how long the cover is kept.
One framework commonly used across the industry starts from clearing household debts, replacing income for dependants for a period, and allowing for major future costs. It is a description of how sums insured are often discussed, not a calculation or a recommendation. A licensed practitioner can work through a figure specific to your situation.
Why people read this page
A first mortgage, a new baby, a partner going part-time: the moments that change a household's finances are usually the moments life cover gets researched. This page explains how the product works in Australia so that conversation starts from understanding, not from a sales pitch.
How a claim works
A claim runs in three broad steps.
The beneficiary or the policy owner contacts the insurer (or the super fund, if cover is held inside super). Most insurers have a dedicated claims line and a claims form. This step starts the clock.
The insurer asks for a death certificate, the policy schedule, and identity documents for the beneficiary. If the policy was held inside super, the trustee also reviews the binding nomination (or runs a discretionary process if the nomination has lapsed or wasn't made).
The insurer reviews the documents, confirms the cause of death, and pays the sum insured. Straightforward life claims often resolve in a few weeks. Claims that involve disclosure questions take longer because the insurer reviews the original application against the medical history.
Frequently asked
Whether life insurance is worth it depends on circumstances: debts, dependants, household income and existing resources are the factors usually weighed. Households where others rely on one income often hold cover; people with no debts or dependants often hold less or none. A licensed practitioner can talk through your situation.
Many super funds provide default life cover to eligible members, but under the Protecting Your Super and Putting Members' Interests First rules it may not start automatically for under-25s or low-balance accounts, and it can switch off on inactive accounts. Check your fund. To check, log in to your super account and look for the insurance section, or read the fund's product disclosure statement. The cover amount is usually listed alongside any default income protection or TPD cover.
A common framework is to size cover to clear household debts, replace income for dependants for a set number of years, and leave a buffer for future costs like education or a partner's retirement gap. Any figure you arrive at is an educational estimate, not a quote. A licensed practitioner can work through the calculation for your specific situation.
Yes. Many Australians hold default cover inside their super fund alongside a separate outside-super policy. The two policies are independent and pay out separately if a claim is made. The in-super vs outside-super guide sets out how the two routes interact and what to think about before holding cover in both.
A pre-existing condition doesn't automatically prevent you from getting cover. The insurer's underwriter reviews the condition during application and decides whether to accept on standard terms, apply a loading, exclude the condition, or defer the decision pending more information. Disclosing the condition fully at application is essential. Non-disclosure can affect a future claim.
Claim times vary by insurer and evidence required; APRA and ASIC publish insurer-level claims data (MoneySmart's claims comparison tool). Claims involving disclosure questions, super-fund trustee reviews, or coronial inquiries take longer.
Life insurance premiums are generally not tax deductible when held outside super. When cover is held inside super, premiums are funded from super contributions, which have their own tax treatment. Tax outcomes depend on individual circumstances. A qualified tax accountant can confirm how the rules apply to you.
On a stepped-premium structure, your base premium typically rises each year as you age. On a level-premium structure, the base premium stays flatter through the life of the policy, though insurers can adjust their underlying rates. Both structures are subject to industry-wide base-rate changes from time to time.
For cover held through super, a valid binding death-benefit nomination directs the trustee to pay eligible beneficiaries or your estate, subject to super law and the fund's rules. Policies held directly use the insurer's ownership and beneficiary arrangements.
Most Australian life insurance policies include an industry-standard exclusion for suicide within the first 13 months of the policy starting. After 13 months, suicide is typically covered under standard policy wording. Exact terms vary by policy. The product disclosure statement and policy schedule for your specific cover are the source of truth.
Yes. Most Australian life insurance policies can be cancelled at any time. Some policies have a cooling-off period (typically 21 to 30 days, the statutory minimum is 14 days; many insurers offer longer) during which you can cancel and receive a full premium refund. After the cooling-off period, cancellation stops cover and ends future premiums but doesn't refund premiums already paid.
Life insurance pays a lump sum on death or terminal illness, sized to the policy. Funeral insurance pays a much smaller lump sum and is designed specifically to fund funeral costs. The premium structures and underwriting rules differ. Life cover and funeral cover are different products at very different sums insured.
No. Life insurance pays a one-off lump sum on death or terminal illness. Income protection pays a regular monthly benefit if illness or injury stops you working. The two products are typically held alongside each other rather than instead of each other.
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