Types of life insurance in Australia

Life insurance is there for you in life emergencies. Because there's more than one way in which your life can change unexpectedly, insurers offer specific policies for various different scenarios and needs. We've broken down the main ones down for you below.

Compare the 6 main types of life insurance in Australia

What type of life insurance do you need?

Take our short quiz to find out what type of life insurance may be best for you.

_{The following calculation is an estimate based on your answers. There are limitations. You should always speak to an adviser to get a clearer understanding of your needs and the right mix of insurance for you.}

Life insurance

Life insurance pays your loved ones (the person or persons you select as beneficiaries) a lump sum payment when you die or are diagnosed with a terminal illness. You can choose the amount they'll receive – the maximum sum insured limit is generally around $1 and $15 million. Life insurance is sometimes also referred to as life cover or death cover.

Who needs life insurance?

Consider life insurance if these are your priorities:

Owning a home

If you were to die unexpectedly, a mortgage would be left behind for your partner to deal with.

Starting a family

If you died unexpectedly, the cost of raising your children would be left for your partner to manage.

Planning retirement

If you're not debt-free yet it's worth considering life insurance.

Get a life insurance quote

Total and permanent disablement (TPD) insurance

TPD insurance provides a lump sum payment if you suffer a serious illness or injury that leads to total and permanent disablement. In order for a claim to be paid, you will need to be unable to be likely to ever return to work again. It's often available as part of a life insurance policy.

Who needs TPD insurance?

Consider TPD if these are your priorities:

Owning a home

If you can't ever work again TPD can be used to take care of your mortgage.

Starting a family

TPD can assist with the costs of raising a family e.g. education in the absence of your income.

Safeguarding against unexpected health issues

TPD can pay for expenses where health insurance doesn't – for example, if you need home modifications.

Learn more about TPD cover

Trauma insurance

Trauma insurance is designed to provide cover when you suffer from a serious illness or health condition. When you experienced a specified trauma event, for example heart attack, cancer or stroke, trauma insurance provides a lump sum benefit. This type of cover is sometimes also referred to as critical illness insurance.

Who needs trauma insurance?

Consider trauma insurance if you want to:

Deal with unexpected health issues

For example if you are diagnosed with cancer or a heart attack this can help with medical bills and life after treatment.

Learn more about trauma insurance

Income protection insurance

Income protection insurance pays an ongoing monthly benefit to replace your income when you are ill or injured and unable to work. Most policies will replace up to 75% of your regular income and may also offer cover for involuntary unemployment.
You also have the freedom to choose:

• The waiting period. This is the amount of time between when you suffer your illness or injury and when you start receiving benefits.
• The benefit period. This is the maximum length of time for which your policy will pay an ongoing benefit.

Who needs to consider income protection?

Workers who rely on their income

If you are reliant on your income to pay the bills, including if you're self-employed or a high-income earner, then it's important to consider.

Homeowners or renters

Income protection can help you keep up with mortgage repayments or rent if you are out of work.

Ongoing family living costs

You'll be able to keep up with the costs of raising children – for example, school fees, food and sports classes.

Compare income protection insurance

Personal accident insurance

Personal accident insurance, which is sometimes also referred to as accidental injury insurance, provides a lump sum payment when you are injured as a result of an accident. It covers injuries such as dislocations, fractures, severe burns and loss of sight or limbs, with different benefits payable depending on the type of injury. It's different from income protection insurance because it doesn't cover illnesses – only accidents.

Get a quote for personal accident insurance

Funeral insurance

Funeral insurance provides a lump sum payment to your loved ones or beneficiaries when you pass away. This benefit can be used to cover the cost of your funeral and meet any other immediate expenses that may arise. It’s generally very easy to apply for funeral insurance cover – there's usually no medical tests required and you are guaranteed acceptance if you're under 70 years of age. However, if you can afford life insurance, this is often a better value option.

Compare funeral insurance

FAQs about life insurance types

• What types of life insurance are there in Australia?

  These are the 6 main types of life insurance you can get in Australia:

  • Life insurance
  • Income Protection Insurance.
  • Total and Permanent Disability (TPD) Insurance
  • Trauma Insurance
  • Personal accident insurance
  • Funeral insurance

• What does life insurance cover?

  A life insurance benefit payment can be used to:

  • Replace your lost income
  • Repay your mortgage and other debts
  • Help your family meet ongoing expenses
  • Pay for the cost of your funeral
  • Ensure that your loved ones can maintain their current standard of living should you pass away unexpectedly

  Most will not provide any cover if your claim is a result of:

  • Suicide or intentional self-inflicted injury within the first 13 months of cover
  • Death caused by your involvement in illegal or criminal activity
  • Your involvement in a dangerous activity, for example an extreme sport

• I already have life insurance – why should I consider other types of insurance?

  There's more than one way in which your life can change unexpectedly, so insurance products are designed to meet specific scenarios and needs.

  For example, if you were in a car accident and became totally and permanently disabled, you would not be eligible for a death benefit from your life insurance policy. However, you could have significant medical bills, rehabilitation expenses and home modification costs – and all while you may no longer be able to earn an income. With both TPD insurance and term life insurance, you would receive the financial support you need.

  Similarly, would you be able to keep paying the mortgage and providing for your family if you were forced to temporarily take some time off work due to injury or illness? Without income protection insurance in place, you and your family could end up in serious financial difficulty.

• Can I combine life insurance cover?

  Yes, many insurers allow you to bundle different types of cover together. For example, term life insurance can be paired with TPD cover and trauma insurance, while if you're a sole trader or small business owner, you may want to consider adding business expenses insurance to your income protection cover.

Written by

Gary Ross Hunter

Editor, Insurance

Gary Ross Hunter was an editor at Finder, specialising in insurance. He’s been writing about life, travel, home, car, pet and health insurance for over 6 years and regularly appears as an insurance expert in publications including The Sydney Morning Herald, The Guardian and news.com.au. Gary holds a Kaplan Tier 2 General Advice General Insurance certification which meets the requirements of ASIC Regulatory Guide 146 (RG146). See full bio

Gary Ross's expertise

Gary Ross has written 644 Finder guides across topics including:

• Health, home, life, car, pet and travel insurance
• Managing the cost of living