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Is life insurance worth it?
Life insurance can offer peace of mind that your finances will be protected if a serious life event strikes. Ultimately, the decision rests on your financial position and individual circumstances.
For some people, getting life insurance ends up being one of the best decisions they ever make.
That's because life insurance is there to help when things go seriously awry. It can cover medical bills if you get sick and keep a roof over your head if you can't pay the mortgage.
It can also give you the financial freedom to focus on getting better after an injury and make sure your family is well looked after in the event of your death.
If your family would struggle to get by without your income, life insurance can give them a financial safety net. It could cover your children's school fees, let them stay in the family home or even pay for life's everyday expenses.
Medical care.
Life insurance can pay for rehabilitation and private healthcare costs if you suffer a serious accident or critical illness. It can cover the cost of installing medical equipment in your home and ensure you get the best care possible.
Quality of life.
Life insurance can pay for home renovations if your mobility changes or for a carer so you can maintain independence. It can also pay out if you're diagnosed with a terminal illness, so you can spend the money making the most of the time you have left.
It's reliable.
Despite what you may have heard in the media, relatively few life insurance claims are denied. Studies from ASIC and APRA show that over 90% of all life insurance claims are paid by Australian insurers.
When is life insurance a good idea?
There are lots of different motivations for buying life insurance. Some of the main reasons are:
If your family relies on your income. If your family would face financial hardship without your salary, it's a good idea to get life insurance which protects your income or pays out a lump sum.
If you have little savings. Would you be able to cover your bills if you were out of work for a few months, or even years? If not, life insurance could save you some serious stress.
If you're self-employed. Workers compensation doesn't cover self-employed people so if you're injured or killed on the job, you won't receive a benefit. Life insurance is a great alternative.
Why it's important to consider life insurance
If you have someone who is relying on your income, then life insurance is particularly important. And not just kids. This can include elderly parents or a partner. No one is ever really prepared for life's harsh surprises, but insurance can help soften the blow.
— Phil Thompson, owner of Skye Wealth, a specialist life insurance advisory.
Which life insurance is right for me?
Life insurance is an umbrella term which covers several different types of insurance. You can buy standalone policies or bundle them together for more comprehensive cover. The six main types of life insurance are:
Sometimes called personal accident insurance, it provides a lump sum benefit if you are injured or killed accidentally. This does not include cover for illness.
When is life insurance not necessary?
Although life insurance is a worthwhile investment for lots of people, there are some situations in which it's just not necessary. We'd encourage you to think twice about life insurance if any of the following apply to you:
You have extensive savings or assets. If you've already accumulated enough wealth to live comfortably or have income streams that can protect your family after your death, there may not be a need for life insurance.
Your family does not rely on your income. If your partner earns enough to maintain your family's lifestyle, you may not need life insurance. Having a policy could still reduce stress for your partner, but it may not be considered essential.
Your children are financially independent. If your children have become self-sufficient adults, you may want to reconsider life insurance. Once your children reach a certain age and become financially independent, any benefits they receive are taxed.
Is life insurance worth it for a single person?
In some situations, yes. Remember, life insurance doesn't just pay out when you die, it can also pay out if you're seriously injured or fall critically ill. Single people can see lots of benefits from a life insurance payment, including:
Help covering the bills, like rent or your mortgage, while you're recovering
Money so you can retrain, if you're no longer able to do your usual job
Money to pay for private healthcare or home nursing
Money to pay for home renovations if your mobility is impacted
The cost of a funeral covered, so you receive your preferred burial or cremation
Are the benefits of life insurance worth the cost?
That depends entirely on your own personal circumstances. The cost of life insurance varies depending on lots of different factors, including your age, overall health and chosen coverage amount. That's why it's so important to get a quote, before you decide whether it's worth it.
If you have financial commitments, such as a mortgage, which you wouldn't be able to cover without your income, life insurance is a good idea. Particularly if you have children who are financially dependent or your partner relies on your income.
However, if you're a senior with poor health, your life insurance policy will be more expensive than that of a healthy young person. If your kids and partner are financially independent or you have investments that would provide income even after you could no longer work, you may decide the regular premiums just aren't worth it.
Of course, the decision is entirely up to you. Everyone's personal circumstances are different and we can't tell you what's right in your case.
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Why compare life insurance with Finder?
You pay the same price as buying directly from the life insurer.
We're not owned by an insurer (unlike other comparison sites).
We've done 100+ hours of policy research to help you understand what you're comparing.
Why you can trust Finder's life insurance experts
We're free
You pay the same as buying directly from the life insurer. Better still, we regularly run exclusive deals that you won't find on any other site – plus, our tables make it easy to compare policies.
We're experts
Our team of life insurance experts have researched and rated dozens of policies as part of our Finder Awards and published 250+ guides to make it easier for you to compare.
We're independent
Unlike other comparison sites, we're not owned by an insurer. That means our opinions are our own and we work with lots of life insurance brands, making it easier for you to find a good deal.
We're here to help
Since 2016, we've helped 270,000+ people find life insurance by explaining your cover options, simply and clearly. We'll never ask for your number or email. We're here to help you make a decision.
Frequently asked questions
The ultimate outcome of having life insurance is peace of mind. If you have loved ones who will be impacted by your death, life insurance can provide financial security so that they'll be taken care of.
It really depends. As with any insurance, you're paying a premium in exchange for a guarantee that you or your loved ones will receive financial compensation in the event of a loss. Your 20s are the best time to find affordable life insurance, but this is because you're less likely to claim for it.
Your 30s and 40s – generally speaking – are a time when many take on their biggest debt, in the form of a mortgage. Life insurance can offer a great deal of peace of mind around this time.
If you were to wait until you turn 60, the cost of insurance would be much higher, but this could be when you're more likely to need cover.
One of the biggest disadvantages of life insurance is the cost. While a policy can cost less than $5 per week for a healthy 40-year-old, the cost increases significantly the closer you get to 70. Life insurance is still an option from the age of 70 but it's much harder to find an insurer that will cover you. This is another downside, you really need to plan ahead to get the most out of your insurance.
It really depends. First, you should work out how much life insurance you need and whether you can match that with a dedicated savings account. If savings still seems like a viable option, you can compare the benefits that come with life insurance and whether you'd be missing out on something important either way.
One big advantage of life insurance is the advanced funeral benefit which pays out a lump sum to your loved ones to help pay for immediate expenses following your death, such as your burial or cremation.
Nicola Middlemiss is a contributing writer at Finder, with a special interest in personal finance and insurance. Formerly a business and finance journalist, Nicola has written thousands of articles helping Australians better understand insurance and grow their personal wealth. She has contributed to a wide range of publications, including Domain, the Educator, Financy, Fundraising and Philanthropy, Insurance Business, MoneyMag, Mortgage Professional, Yahoo Finance, Your Investment Property, and Wealth Professional. Nicola has a Tier 1 General Insurance (General Advice) certification and a Bachelor's degree from the University of Leeds.
Learn about the different types of life insurance available in Australia, and when you might need to take out cover.
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