Life insurance for families: What to consider
Is there such a thing as family life insurance?
While there’s no product called ‘family life insurance’, there are a range of life insurance options available to cover you and your family. You and your partner could be covered under a joint or multi-life policy and some policies may offer limited child cover as an additional benefit.
There are a few types of life insurance that could benefit your family, but the most common is term life insurance. A term life insurance policy could pay out a lump sum to your beneficiaries if the life insured passes away or is diagnosed with a terminal illness. This could provide financial security by covering payments for everyday expenses such as mortgage repayments, school fees and household bills.
What types of life insurance are there?
Australians can choose from the following life insurance options:
- Term life insurance. This can provide a lump sum payment to the policy beneficiaries (e.g. family) if the policy owner passes away or is diagnosed with a terminal illness.
- Total and permanent disability insurance (TPD). This provides a payout to the policy owner if they become totally and permanently disabled.
- Trauma insurance. This type of policy can pay a lump sum to the policy owner if they suffer from a certain condition (e.g. cancer, heart disease or an injury from an accident).
- Income Protection Insurance. This can cover up to 70% of your income through monthly payments once your chosen waiting period has been served, if you are unable to work due to an accident or injury.
Different policies may include other benefits like funeral cover, child cover (may cost extra), financial planning services and grief counselling.
Expert tips for life insurance for families
Our life insurance expert, Steven Spicer, has some tips for families looking for life insurance cover.
Steven Spicer
Executive General Manager – Health, Life & Energy
Consider your family needs
When comparing life insurance policies, you’ll notice there are different kinds of cover that can provide your family with financial protection. As a deeply personal decision, it’s important you take time to consider which policy is appropriate to meet your family’s needs.
Choose your level of cover
Easy-to-use tools, including online calculators, can provide some guidance if you’re unsure which level of cover may give you peace of mind. As a starting point, you may wish to consider your family’s everyday expenses, lifestyle factors and any debts that need to be paid off.
Be honest with your insurer
Remember that you have a duty to take reasonable care not to make a misrepresentation to an insurer when taking out a life insurance policy. This means that you’re obligated to disclose any information that’s relevant to your insurer’s decision to cover you. If you’re unsure what this could include, make sure to ask your insurer, as failing to do so could result in you missing out on some or all your payment.
How life insurance works for families
What family expenses can a life insurance payout help cover?
A life insurance payout can be used at the beneficiaries discretion, however it could help cover some of your costs when your family is left with one less income. There may be several immediate expenses to pay for, such as hospital or funeral expenses. On top of that, there are also long-term expenses life insurance could help cover, including:
- Childcare/education.
- Food and clothing.
- Medical requirements.
- Mortgages and loans.
- Household bills.
What doesn’t life insurance cover?
A life insurance claim may not be paid if it results from an event or condition that your policy excludes. The insurer will let you know if there are any exclusions specific to your personal circumstances, before you enter into an insurance contract Any standard exclusions will be listed in the relevant Product Disclosure Statement.
It’s also important to remember that not all life insurance policies cover children. You may have to add on child cover separately, usually for an additional cost.
You should always read the relevant Product Disclosure Statement (PDS) and policy documents to find out the inclusions and exclusions of your policy.
Can I take out life insurance for my child?
Some insurers offer standalone child cover for children under 18, but these policies are few and far between. However, you can usually add them to your own life insurance policy, typically for an additional cost. It’s worth shopping around to find the right product that offers the coverage you want.
Life insurance with child cover will typically pay out a benefit in the event of the death or terminal illness of your child. In addition, some policies may also offer:
- Cover for certain medical events (e.g. loss of sight or speech, paraplegia).
- Carer benefits (e.g. $5,000 if you must stop full-time work to care for your child from home, should a medical practitioner authorise it).
However, coverage will vary depending on your policy and insurance provider and may be subject to specific terms and conditions.
How much life insurance cover does my family need?
Raising a family is expensive, especially when one parent is no longer around or able to work due to injury or illness. That’s why it’s essential to make sure your policy would provide you enough money to cover your family’s expenses, should you choose to get insured.
As an example, according to our life insurance calculator, you may wish to consider around $1,000,000 in life insurance coverage if you have:
- An annual income between $81,000 and $100,000.
- Two children between 3 and 13 years of age.
- A mortgage between $250,000 and $500,000.
However, when calculating how much life cover your family needs, you may also want to consider:
- Any outstanding debts.
- Your family’s regular expenses (e.g. education, childcare, living costs).
- Any superannuation, savings, investments and assets to support your family.
- Whether you have life insurance through your superannuation fund.
- Whether you want to cover the costs of your funeral.
How much can life insurance cost for a family?
Life insurance premiums in Australia will depend on many factors, including:
- Whether you’re insuring one or both parents.
- Whether you require cover for children.
- The age, health, lifestyle (e.g. smoking status) and occupation of those being insured.
- Sum insured or benefit amount (i.e. how much money is paid out)
- Policy features (additional cover, special conditions).
- Premium structure (i.e. stepped vs level premiums).
If you’d like an idea of how much a policy for your family might cost, you can complete a life insurance quote.
Can I take out life insurance for another family member?
Life insurance can cover either the person who takes out the policy (i.e. the policyholder), your partner or both of you (with a joint policy). If you want to take out life insurance for a family member, you can only do so with their knowledge and authorisation.
Insurance companies may require a signed and verified personal statement about the insured family member’s situation (e.g. age, health, occupation) to assess their insurance risk.
Meet our life insurance and income protection expert, Steven Spicer
As the Executive General Manager of Health, Life and Energy, Steven Spicer is a strong believer in the benefits of private cover and knows just how valuable the peace of mind that comes with cover can be. He is passionate about demystifying the health insurance industry and advocates for the benefits of comparison when it comes to saving money on your premiums.