Thinking about life insurance can be daunting, but if other people depend on you, it can help create greater peace of mind.

How much cover should you get?

Your stage of life and financial situation will impact how much life cover you need.

If you have a growing family, you’re likely to need more cover than if your children have left home, for example. If you have a lot of debt to pay off or a big mortgage, you’ll likely need more life cover.

To work out how much cover you need, ASIC MoneySmart suggests asking yourself these questions:

  1. How much money would your dependants need for mortgage payments, funeral expenses and other debts as well as ongoing living costs?
  2. How much would your dependents receive from your superannuation, investments and savings?

Who receives the money?

The people you nominate to receive your life cover payout when you pass away are known as your beneficiaries. Make sure you know who your beneficiaries are and whether your nominations are ‘binding’ or ‘non-lapsing’ or ‘non-binding’ and ‘lapsing’ because this determines whether the people you nominate are legally entitled to receive the money.

Binding or non-lapsing nomination

If you make a binding or non-lapsing nomination, your insurer is legally required to pay the people you have nominated.

Non-binding or lapsing nominations

If your nomination is non-binding or lapsing, it means that while your insurance provider will consider who you have nominated, they won’t necessarily get the full benefit; your insurer will consider relevant laws as they work this out.

Should you choose stepped or level premiums

When you sign up for any type of personal insurance, you may be given the option to pay either stepped or level premiums. This can affect the cost of your cover over time. 

Stepped premiums

Stepped premiums are usually calculated on your age, so the younger you are the less you need to pay. But your premiums will increase over time, depending on your age, policy and other factors such as your health.

Level premiums

Level premiums are calculated on an average premium, so you might pay more when you are younger, but you might also pay less when you get older. You may need to pay more over time due to inflation or changes to your insurance provider’s fees. 

What about insurance through super?

Before you purchase life insurance, find out what you are already covered for through your super fund. It is worth considering the benefits and trade-offs of getting life insurances through super.


Things you should know

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.