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Financial MattersWhat is Life Insurance?
Life insurance is a form of cover that you can take out to reduce the financial burden on your loved ones if you die or suffer a terminal illness. Even if you’re not the main provider of the household, or if you are comfortably retired, it’s not hard to imagine how your family could be affected financially if you were gone. On top of ongoing living expenses, your loved ones could be left with additional costs like organising your funeral, legal fees around your Will or estate, and making any changes to their living situation. Life insurance is designed to make this transition and loss a lot easier for the people you care about.
What is direct life insurance?
Direct life insurance is a type of life insurance that you can purchase on your own from the insurance company, without using a third-party agent or broker. For example – life insurance through your superannuation is not considered ‘direct’ as it is organised by your employer or union. If you see a life insurance ad online or on TV and decide to take out the policy, you have purchased direct life insurance.
When you hear or read something about life insurance in Australia, most of the time it is referring to direct life insurance.
One of the most important things to remember about direct life insurance is that you’ll need to do all of the research yourself when comparing policies. However, going direct also can give you more control over which insurer you go with. It may also be quicker and easier to get covered in some cases.
Is direct life insurance better for older Australians?
Everyone’s insurance needs are different, so it may be best to speak to a financial advisor if you’re unsure about which type of policy to go with. If you are comfortable doing your own research and reading the Product Disclosure Statement of each policy to understand what it covers (and what’s excluded), you can usually take advantage of some great benefits and features offered by some providers. For example, Seniors Life Insurance lets you take out cover later in life between age 45 and 79 without undergoing any blood tests or medicals when you apply.
Read more about direct life insurance >
Different types of life insurance
Life insurance has several different types of policies. Some include:
- Term life insurance: covers you for a set number of years or until you reach a certain age (whichever comes first).
- All of life insurance: this type of policy covers you for as long as you live or make a full payment claim (or until you decide to cancel).
- Group life insurance: this is a type of policy that you receive through your employer or superannuation fund. Keep in mind that group life insurance is not tailored to your specific needs or budget as your employer/super fund simply purchases a single contract which covers several people, being the funds members. This cover may expire when you reach a certain age or retire.
It’s important to remember that each of these types of policies have their own specific benefits, so you’ll need to factor that into your decision. For example, Seniors Life Insurance offers a triple payout for accidental death up to $600,000. This means that your family will have additional funds at a time when they are likely to have a lot of unexpected financial obligations.
What about funeral insurance?
Funeral insurance is a different type of insurance policy that is designed to cover the cost of a funeral or other final expenses and is generally guaranteed acceptance.
This works by paying out a smaller lump-sum benefit to your family when you die, helping them with the cost of your funeral. While this can be a great way to help your family with short-term expenses that come up when you pass away, it’s important to remember that funeral insurance only offers a limited cover amount and isn’t designed to cover long-term expenses such as living costs, rent/mortgage obligations, education, medical care, and so on.
Benefits of life insurance
Life insurance can help you make sure your family or other dependents are financially taken care of if you pass away. It could also help you financially if you are diagnosed with a terminal illness (which is usually defined as being given 12 or 24 months or less to live), allowing you time to focus on loved ones rather than your bills. That might include paying medical expenses, making pre-arrangements for your funeral, paying off any debts or loans in your name, relocating/downsizing, or whatever else you feel is best for you and your loved ones.
The biggest advantage of life insurance is that the money can be used freely by you or anyone else you nominate. There are no restrictions on what can or can’t be done with the payout, which means you won’t have to worry about sudden changes to your family’s financial needs. This is very different to other types of insurance policies which only cover selected losses (such as damage to your car or home).
The best way to see the benefit of life insurance, and determine whether it’s right for you, is to think about your family’s quality of life and how much it costs you to maintain. On top of day-to-day living expenses, you may consider what you want for your loved ones if you were no longer around such as paying off the family home, supplementing their income or having enough money for an occasional holiday (especially during retirement). Even if you’re not the main provider, your family might have trouble achieving these without you.
Life insurance can be a great benefit for older Australians
As we get older, our needs and circumstances change, and many of us tend to have a lot of valuable things worth protecting. Whether it’s protecting our children and even their children, life insurance can help protect what we’ve worked hard for.
It’s also important to remember that entering retirement requires just as much planning and hard work as every other stage of life. You may need to consider if your family can comfortably get through the next 20 years or so if you were not there to provide for them, including any major challenges or roadblocks that come up in that time.
How does life insurance work?
Life insurance pays out a lump-sum benefit to your family when you pass away or to you if you become terminally ill. The process usually starts by getting approved by an insurer and then setting your benefit amount (how much you want your family to receive). This often varies depending on the insurer you choose – you might be asked to undergo a medical test before taking out cover, or your benefit amount may be capped depending on your age bracket.
Because getting approved for a life insurance policy requires answering health questions, it may be easier to take out cover while you are healthy.
Does life insurance work differently for those over 50?
Every life insurance provider treats age differently, so you may find some changes with your cover as you get older. One major difference you’ll need to consider is how much cover you are eligible to apply for when you are over 50.
How to get covered
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1Request a quote
Just answer a few basic questions about yourself to get started. We’ll get you a quote in minutes.
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2Choose your cover
Tailor your policy and choose the level of cover you want.
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3Get covered
Enjoy life knowing the people who matter most to you are in safe hands.
You’ll also need to decide who to nominate as your beneficiaries; these are the people who are authorised to make a claim under the policy and receive the payout when you pass away. The payment is made as a lump-sum benefit to your beneficiaries or estate.
What does life insurance cover?
Life insurance covers you for death by any cause (suicide is usually excluded for a set period of time). That means you’ll be covered for events that lead to death such as:
- accidents
- medical complications
- natural causes
- acts of violence
Life insurance also covers you for terminal illnesses – so you can make a claim if a doctor advises that you have 12 or 24 months or less to live. It’s also important to remember that like any policy, there may be exclusions or other stipulations around covered events. Make sure you read the Product Disclosure Statement carefully to know what you’ll be covered for before signing up.
Life insurance and tax considerations
Many seniors may wonder how life insurance can affect their taxes, especially during retirement. Direct term life insurance premiums are generally not tax-deductible in Australia, and any benefit or payout you receive will not be taxed either. If you have group life insurance through your superannuation, you may be able to claim a deduction on the premiums you pay with your pre-tax income, depending on how your contributions are funded, this may come from your pre-tax income, however your beneficiaries may also need to pay tax on any payout they receive, particularly if you have not yet reached your preservation age under superannuation law.
Keep in mind that this is general information only and should not be taken as financial or tax advice. You should seek guidance from a tax advisor to ensure your circumstances are taken into account.
Did you know?
Direct life insurance premiums are generally not tax-deductible in retirement, since the tax rules around life insurance don’t change when you retire. Tax rules for obtaining benefits through your superannuation, including insurance benefits that you are eligible for, may change as you age and retire.
Read more about life insurance and tax >
How much does life insurance cost?
There is no set price for life insurance as each policy is tailored to your specific needs and circumstances. Premiums are usually based on:
- your age
- whether you are a smoker
- your current health and medical history
- the level of cover you choose
- the duration of cover.
Your provider will ask you about all of these when you apply. It’s important to make sure you answer everything accurately and truthfully as this will affect your cover and eligibility when making a claim.
It’s a good idea to discuss your plans with loved ones as this will help you understand how much they may need if you were to pass away. If you take out a large level of cover, you may need to factor in higher premiums. However, a lower benefit amount could put you at risk of being under-insured. Speak to a financial advisor if you are unsure about your needs.
Did you know?
Australian Seniors lets you apply for Seniors Life Insurance from age 45 up to 79 and offers lower starting premiums for non-smokers.
How Australian Seniors can help
Seniors Life Insurance helps put you back in control of your family’s financial future, with up to $200,000 in cover right when it’s needed most.
Benefits of choosing Seniors Life Insurance
A flexible cover amount that suits you
Choose how much you or your family could receive if you pass away or become terminally ill. You can set a benefit amount from $10,000 up to $200,000.
Cover for when you need it most
We know that the older you get, the more you have to protect, so Seniors Life Insurance allows you to apply from age 45 up to 79.
Immediate cover
Once your policy is set up, you’ll be covered straight away for death and for terminal illness.
Easy to apply with no medicals
Simply answer eight questions about your medical history over the phone. Once approved, you can get covered in minutes.
20% advance payout to cover funeral costs
When your family makes a claim, 20% of the benefit amount may be paid in advance, so they won’t have to worry about the cost of your funeral or other immediate expenses while the claim is assessed.
Triple payout for accidental death
Your family’s benefit amount will be tripled up to $600,000 if you pass away from an accident, helping with any last-minute expenses they might face.
Non-smokers can enjoy lower starting premiums
You’ll have lower starting premiums if you’re a non-smoker.
Your own Australia-based personal claims specialist
If you or your family need to make a claim, we’ll assign one of our local claims specialists to look after everything. No need to explain things to multiple people.
Things you should know
- Suicide is excluded for the first 13 months.
- This policy expires at age 85, regardless of what age your cover started.
- Terminal illness with diagnosis of 24 months or less to live.
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Better LivingReady to choose Australian Seniors?
Get peace of mind when choosing Australian Seniors. Talk to one of our friendly team members today. We're here from 8am to 8pm Monday to Friday on 1300 050 510. Or, if you prefer, we can call you back when it suits.