Answering your 7 most Googled life insurance questions

We’ve all Googled things like “Do I really need life insurance?” or “How much does it actually cost?” Whether you’re thinking about protecting your family, covering your mortgage, or just want some peace of mind, we’ve got you covered. 

To help you out, here are answers to 7 life insurance questions that Australians search for the most. Let’s get into it. 

1. Do I really need life insurance? 

Short answer: Probably. While no one likes thinking about worst-case scenarios, life insurance is there to financially protect your loved ones if something happens to you. Whether you’ve got a mortgage, kids, or even just want to make sure your family isn’t left with hefty bills, life insurance can be a lifesaver (literally). 

If you don’t have life insurance, think about what your family’s financial situation would look like without your income. Would they be able to pay the mortgage? Cover the bills? Life insurance can give you that extra layer of security. Let’s break it down... 

• mortgage and debt: If you’ve got a mortgage or other major debts, your loved ones could inherit those liabilities. As of 2024, approximately 3.2 million Australian households have mortgages, representing a significant portion of the population owning homes with loan repayments. This highlights the need for financial security, especially if you're one of those homeowners. Mortgage repayments now average around $3,959 per month nationally, with New South Wales borrowers paying the most, at $4,836 per month. Given these high costs, having life insurance to protect your family in the event of your passing can provide peace of mind, ensuring that your mortgage and other debts are covered 

• dependents: Do you have kids or dependents who rely on your income? If your partner or kids depend on your salary to cover everyday costs like school fees, groceries, or bills, life insurance helps make sure they’re financially secure if the unthinkable happens. 

• funeral costs: The average cost of a funeral in Australia ranges between $4,000 to $15,000. Without life insurance, that cost could fall on your family, adding financial stress at an already emotional time. 

2. How much does life insurance cost? 

Ah, the million-dollar question! The cost of life insurance depends on a bunch of factors, including your age, health, and how much cover you want. Generally, younger and healthier people pay less. 

The government's Moneysmart website has a super handy life insurance calculator that helps you figure out what you might need to pay. Just pop in your details—like your super balance, mortgage size, and how much your family needs each week or month—and it’ll do the rest. 

Then, to make sure you’re on the right track, have a chat with your financial adviser. They can help you get a clearer picture of exactly what kind of cover you need based on your situation. 

3. How much life insurance do I need? 

This depends on your situation. Ask yourself: how much would your family need to cover the mortgage, day-to-day living expenses, and any outstanding debts? A good rule of thumb according to many experts is to aim for enough cover to replace 10 to 12 times your annual income. 

Also, think about any future expenses like your kids’ education or your partner’s retirement. It’s better to have a little extra than not enough when it comes to life insurance cover. 

Here’s how to break it down. Start with covering the essentials: 

• Mortgage or rent: If you have a mortgage, you want your life insurance to cover the remaining balance. Your insurance should at least cover these payments so your family isn’t burdened with housing costs. 

•  Day-to-day expenses: Consider everyday expenses like groceries, utilities, and transportation. How much does your family need each month to maintain their current lifestyle? Your life insurance payout should be able to cover these costs for several years, depending on how long your family will need financial support. 

• Outstanding debts: Besides the mortgage, make sure your life insurance covers any personal loans, credit card debt, or other liabilities that could be passed on to your loved ones. 

4. Do I need life insurance for a mortgage? 

Technically, you’re not required to have life insurance to get a mortgage in Australia, but it’s definitely a smart idea to consider it. The average monthly mortgage repayment is about $3,959, and it can go even higher depending on your location. If you’re the primary income earner, and you pass away or become seriously ill, that mortgage doesn’t just disappear. 

Some people even choose to take out a life insurance policy specifically to cover the mortgage. It’s all about making sure your loved ones aren’t stuck with big financial burdens if you’re not around. 

5. Is life insurance taxable? 

In most cases, no. Life insurance payouts are generally tax-free in Australia if they’re paid as a lump sum to your beneficiaries. However, there can be some exceptions if your policy is held within a superannuation fund or paid as an income stream. It’s always worth checking with a financial adviser or the Australian Tax Office (ATO) for more information and advice on your particular situation. 

6. What does life insurance cover? 

Life insurance is designed to provide financial protection for your loved ones if you pass away or are diagnosed with a terminal illness. The payout can help cover things like: 

• If you pass away or get diagnosed with a terminal illness: Your family gets a lump sum payout, which helps them handle things like the mortgage, bills, or any future financial needs. This type of cover is simply called Life Insurance. 

• If you’re hit with a serious illness like certain types of cancer or you suffer a severe heart attack: You receive a lump sum payment to help with your treatment or living expenses. This is known as Critical Illness or Trauma Insurance. 

• If you’re permanently disabled and can’t work anymore: You get a lump sum payout to help support your lifestyle. This cover is called Total and Permanent Disability (TPD) insurance. 

• If an illness or injury leaves you unable to work temporarily: You receive a monthly benefit (up to 70% of your salary, with a cap of $30,000 a month) to keep things ticking over while you recover. This is known as Income Protection Insurance. 

This is just a general overview of the different types of life insurance policies out there. Always double-check the fine print in your policy documents for the exact details about what’s covered. That way, there are no surprises when you need to make a claim! 

Some policies also offer additional benefits, like cover for serious illnesses or disabilities, so make sure you read the fine print. 

To know more about the different types of life insurance, head over to: Insurance 101: Everything you need to know about life insurance 

7. Can I have more than one life insurance policy? 

Absolutely, you can! There’s no rule against holding multiple life insurance policies. Many Australians choose to have more than one policy to make sure they’re fully covered in different situations. You might have a life insurance policy through your superannuation and decide to take out an additional standalone policy to increase your coverage or ensure your loved ones have enough financial security if something happens to you. 

Many Aussies already have life insurance as part of their super fund. This cover is usually automatic and can include life insurance (death cover), Total and Permanent Disability (TPD) insurance, and income protection. However, the coverage amount is often limited. According to Moneysmart, the average payout from super-based life insurance might not be enough to cover significant expenses like a mortgage or long-term living costs for your family. 

Ready to learn more? 

Life insurance doesn’t have to be complicated, and hopefully, we’ve cleared up some of the biggest questions. If you’re still not sure about which policy is right for you or how much cover you need, it’s always a good idea to chat with a financial adviser.