Types of life insurance

There are different types of life insurance available. These include:

  • Death cover – pays a set amount of money when you die. The money will go to the people you nominate as beneficiaries on your policy.
  • Total and permanent disability (TPD) cover – pays a lump sum to help with rehabilitation and living costs if you are totally and permanently disabled. TPD is often sold with life cover.
  • Income protection cover – replaces some of your income if you are unable to work because of injury or illness.
  • Trauma cover– pays a lump sum if you are diagnosed with a critical illness or serious injury such as cancer, heart attack or stroke.
  • Consumer credit insurance (CCI) – pays a lump sum to cover repayments on your loan that you can’t pay when you lose your job, you are sick or injured or you die.
  • Funeral insurance – pays a lump sum to help your family cover funeral and related expenses when you die.
  • Accidental death and injury cover– pays a lump sum for when a person accidentally dies or is injured. Most accidental death policies include a long list of exclusions, like death from hazardous activities, drugs, alcohol and self-harm.

Which sales channel are you comparing?

  • Through a superannuation fund – this is when default life insurance cover is provided through a superannuation fund or the amount of cover is increased. See Life insurance through your super fund.
  • Through a financial adviser – this is when a financial adviser recommends a life insurance product that may or may not be offered within a superannuation fund. A good financial adviser gets to know you. They work with you to set your financial goals and make a plan to help you achieve them. Take the time to compare different advisers. Knowing what to expect, and what’s in it for them, can make all the difference.
  • Directly through an insurer – this is when a life insurance policy is bought directly from the insurer, generally with no personal financial advice or general advice.

These are the three most common ways life insurance is sold in Australia. Some employers also offer group life insurance to their employees where a single contract covers all employees. See APRA’s life insurance claims data collection for more information on group life insurance.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.