What to do after a life insurance payout (and what NOT to do)
A life insurance payout can be a huge financial relief during one of life’s toughest moments. But it can also feel overwhelming—one minute, you're grieving, the next, you're expected to make big financial decisions.
So, what’s the smartest way to use a lump sum payout? Whether it's replacing lost income, paying off debts, or securing your family’s future, here’s how to make your payout work for you.
1. Take a breath before making big decisions
💡 Stat: Studies show that grief can impact decision-making for up to six months (GriefLink Australia, 2024).
It’s tempting to jump straight into decisions, but unless there’s an urgent financial need, take a moment to pause. You don’t need to make big moves immediately. Give yourself time to process, get financial advice, and make choices with a clear head.
✔ DO: Park the funds in a high-interest savings account while you plan.
❌ DON’T: Make impulse investments or spend on big-ticket items immediately.
2. Cover everyday living expenses
If the person you lost was the main breadwinner, a payout can help replace lost income and keep your household running.
💡 The average Australian mortgage debt is now $600,000 (ABS, 2024), so covering home loan repayments might be a priority.
Where the money can go:
Mortgage or rent payments
Utility bills and groceries
School fees and childcare
Transport and medical costs
👉 Pro tip: Review your monthly expenses and create a budget to stretch your payout wisely.
3. Clear high-interest debt 💳
Debt can drain your finances faster than you think—especially if you’re paying high interest on things like credit cards and personal loans.
💡 Total credit card debt in Australia currently stands at around $41.06 billion, based on the total balance of all cards, according to the Reserve Bank of Australia.
✔ DO: Pay off high-interest debts first (credit cards, personal loans).
❌ DON’T: Feel pressured to pay off a mortgage if the interest rate is low—investing the money could be a better option.
4. Build an emergency fund
💡 Stat: Financial advisers recommend keeping 3-6 months’ worth of expenses in savings for emergencies (Moneysmart, 2024).
Unexpected expenses will pop up—whether it’s medical bills, car repairs, or sudden job loss. Setting aside a chunk of your payout in a high-interest savings account gives you a financial safety net.
5. Secure your future
If you have kids, elderly parents, or plans for retirement, a portion of your payout can help secure long-term financial stability.
Things to consider:
Topping up superannuation
Setting up education funds for kids
Ensuring aged care support for elderly parents
6. Invest wisely (but get advice first!)
Investing can grow your payout over time—but only if you do it right. Speak to a financial adviser before diving in.
💡 Example: A diversified investment portfolio can outperform savings accounts over the long term, but higher returns = higher risk.
Make the money work for you
A life insurance payout isn’t just about surviving the now—it’s about securing your future. Taking the time to budget, prioritise, and seek expert advice ensures that you make the most of it without unnecessary stress.
📩 Need expert advice? Let’s chat.
Resources
1️⃣ Australian Bureau of Statistics (ABS) – Average Mortgage Debt (2024)
🔗 https://www.abs.gov.au/statistics
2️⃣ Reserve Bank of Australia – Credit Card Debt Statistics (2024)
🔗 https://www.rba.gov.au/statistics
3️⃣ Moneysmart – Emergency Fund Guide (2024)
🔗 https://moneysmart.gov.au/saving/emergency-funds
4️⃣ Association of Superannuation Funds of Australia (ASFA) – Retirement Needs (2024)
🔗 https://www.superannuation.asn.au/retirement-standard