Life Insurance, Explained Simply

Life insurance (sometimes called death cover) pays a lump sum to the people you nominate if you pass away, and in most policies if you're diagnosed with a terminal illness. That money isn't tied to any particular purpose. Your family decides how to use it, which is exactly what makes it useful in the months after a death, when bills keep arriving and nobody is thinking clearly.

In practice, families use it to clear the mortgage so the house stays in the family, pay out car loans and credit cards, cover funeral and legal costs, replace the income that's no longer coming in, and keep school fees and childcare arrangements steady. Some families use part of it to buy time — so a surviving partner can take unpaid leave rather than return to work immediately.

Life insurance is not an investment and it isn't there to make anyone wealthy. It's there to stop one event from unravelling everything else you've built.

The honest test is simple: if your income stopped permanently tomorrow, would anyone else's life change financially? If the answer is yes, life cover is worth looking at. That usually includes:

• Anyone with a mortgage, especially a single-income or uneven-income household
• Parents with children still at home or still studying
• Couples who've guaranteed each other's debts
• Business owners with loans, leases, or a business partner
• Anyone financially supporting a parent, sibling, or dependent adult

If you're single with no dependants and no debt, life cover may matter less right now — income protection or trauma cover often does more for you.

There's no universal number, but there is a sensible way to build one. Start with what would need to be paid out or replaced:

• Outstanding mortgage and any other debts
• Funeral and estate costs
• A number of years of your after-tax income, so your family isn't forced into decisions straight away
• Education costs still ahead of you
• Any lump sum you'd want set aside for a surviving partner to retrain or reduce their hours

Then subtract what already exists — savings, existing cover inside super, and any employer-provided benefits. What's left is your gap. Most people are surprised in one direction or the other, which is why it's worth doing the maths before looking at prices.

Many Australians already hold some life cover through their super fund. That default cover is convenient and the premiums come out of your super balance rather than your bank account, but it's usually a fixed amount that has little to do with your actual mortgage or family situation, and it can change or end if you change funds or stop contributing.

A retail policy held outside super is generally more flexible: you choose the sum insured, you can hold it jointly with other cover types, and the terms are set out in a policy document you keep. The trade-off is that premiums come from cash flow. Plenty of households end up with a mix — some cover inside super for affordability, topped up outside it. The right split depends on your budget and how much certainty you want.

Insurers price on age, sum insured, smoking status, health history, family medical history, occupation, and sometimes pastimes considered higher risk. Two things matter more than most people expect: your age at application, since premiums are set from where you start, and how you disclose your health.

Full, accurate disclosure at application is the single best thing you can do to protect a future claim. Leaving something out to get a cheaper premium is the most common reason a claim becomes complicated. If you have a pre-existing condition, it doesn't automatically mean no cover — it may mean an exclusion, a loading, or a different insurer being the better fit. That's precisely what comparing across insurers is for.

I start with a short conversation where I take you through your options and answer any questions. From there I compare policies across leading Australian insurers, explain the differences in wording that actually matter at claim time, and put two or three realistic options in front of you with the numbers side by side.

If you go ahead, I handle the application and the back-and-forth with the insurer, and I'm the person you call at claim time. My service costs you nothing — insurers pay me, not you — and there's no obligation to proceed.