2. one third only had cover provided with their compulsory super (and they may not buy a sufficient amount), and

3. the rest had no life insurance at all.

• Death cover - only pays a lump sum to your nominated beneficiaries if you die (causes like accidents or illness are usually covered, but suicide within a year of the policy’s commencement won’t be covered). Most policies are term insurance (see below).
• Total and permanent disability (TPD) - a lump sum is paid if you’re permanently disabled before you retire and unable to return to work (self-inflicted injuries or disablement following a war or rebellion may be excluded).
• Income protection (IP) - can pay 75% of your salary for a while if you’re temporarily unable to work because of sickness or injury. The length of time you receive payments depends on the contract term; for example two years, five years, or up to age 60 or 65.
• Critical or serious illness - also known as trauma insurance, pays a lump sum if you contract a specified illness.

Policies cover up to 30 conditions; most claims arise from cancer, strokes and heart attacks. While claims relating to death insurance should be pretty clear-cut, the other types of ‘living’ insurance have lots of terms and conditions. You need to do your homework, understand policies and you may need independent financial advice.

What insurance do I need?
A young single person with no dependents probably doesn’t need death cover, but might consider income protection or critical illness insurance.

In fact you may consider insurance for the costs of living more important than ensuring family members get a payout after your death. More people are surviving serious illnesses and rehabilitation and care are expensive.

How much cover do I need?
Do you have a mortgage and other debts?
A spouse, children or other dependents?
Assets and investments?
What are your current and expected future earnings?
There are generally two main considerations:

1. Insurance to cover your debts so they’re not passed on to your family and;

2. If you’re the main breadwinner in your family, insurance to provide an income stream if you can no longer work.

According to industry ‘rules of thumb’, people should have death cover of around 10 times their annual salary (this could cost around 0.5% to 2% of your gross salary per year) and income protection cover for 75% of their earnings. Shop around and compare insurers’ cover and prices (including your super fund); they can differ greatly.

Life Insurance Prices
Premiums are set depending on:

1. Age (premiums may increase or cover decrease as you get older)

2. Gender (women generally live longer than men so pay lower premiums for death cover, but more for IP due to higher claims)

3. Health and pre-existing conditions

4. Whether or not you smoke

5. Occupation (for example, a manual labourer pays higher premiums to an office worker) and

6. Waiting period: the time you choose to wait before receiving payment.

Prices vary depending on age and other factors, but:

Death cover can cost around 0.1% of the amount insured (so somebody on $50,000 per year might pay $500 a year for $500,000 cover), while Income protection can cost around one week’s salary per year (premiums are generally tax deductible).
With some policies, premiums are set at the start and won’t change. In other cases premiums are indexed or reassessed at later renewals.

Super fund cover
Your super fund could be the cheapest place to buy life insurance; some funds use their size and buying power to arrange group insurance, resulting in cheap premiums for members. Death and total and permanent disability (TPD) cover is usually available; sometimes income protection is offered. Members often pay a set price for one ‘unit’ of cover, with cover decreasing as they get older.

From 1 July an estimated five million people will be able to choose what fund their employer pays their compulsory super contributions into. Each employer’s ‘default’ fund (where contributions will go for people who don’t make a choice) usually has to have a minimum required level of life insurance, set out in the regulations. The minimum is a premium of at least 50 cents per week, or alternatively a minimum amount of age-based death cover. This minimum amount is in the table below.

Default fund insurance requirements

Age (years)  Death cover ($)

 These minimum insurance rules don’t apply in all cases — for example Retirement Savings Accounts don’t have to meet these insurance requirements and there are other exceptions.

The default amount of insurance automatically provided to super fund members can be quite low. The trap for super members is thinking they have adequate cover with their fund. Reports suggest that the standard amount of cover held by most people through their super is just $100,000 to $150,000; that’s only two- to three-times average earnings. If you’re relying on cover provided with your fund, you may need to buy extra units. Insurance premiums are paid out of employer and personal contributions so consider making extra contributions to your fund to cover this expense.

Cheap Life Insurance Quotes Tips and Traps
This isn’t an exhaustive list (exclusions are rife in life insurance) so compare product disclosure statements and consider getting professional financial advice.

When buying life insurance, ask these key questions:
What’s covered?
What’s not covered?
How much will I be paid after a claim?
What will the insurance premiums cost now and later?

Consider getting a policy with index-linked premiums and cover so you know the cover will keep up with inflation. Consider a non-cancellable policy; otherwise companies may reassess your health or other factors on each renewal, possibly raising your premiums or
refusing to continue cover. Offset clauses allow most insurers to reduce payouts if you have other income (for example, sick pay from your employer or Centrelink benefits). Check the relevant section of the policy for details. Group insurance through super: the agreement is between the fund trustee and insurer. Make sure both know who your nominated beneficiaries are.