What women need to know about life insurance

It could be a financial safety net for you and your family.
Life insurance can be a financial safety net for you and your family.Getty

We might not think about it until we pay the premium or make a claim, but insurance is a part of life for most Australians. And even though health, home, travel and car insurance are pretty common, not as much is said about life insurance.

This is particularly true for women, who tend to have lower financial literacy levels in Australia.

But it can be an important financial safety net for you and your family. Especially as more work is done to address the gender pay gap and support women in their career and life choices.

Like most insurance, you can choose whether you take out life insurance. So, let’s look at the basics.

What exactly is life insurance?

In simple terms, life insurance is a form of protection against some very major changes that could affect your income and life.

“At its heart, life insurance gives people peace of mind when they’re making important decisions and facing life’s biggest challenges,” Council of Australian Life Insurers (CALI) CEO Christine Cupitt tells The Australian Women’s Weekly.

“It gives you the comfort that you’ve done the right thing to protect your family from the financial shock of death, serious injury, disability or illness.”

Different life insurance policies will cover different things (and have different costs/payouts).

There are four main types of life insurance:

  • Life cover or death cover: This insurance provides a lump sum payment to your partner, a family member or someone else of your choosing (a ‘beneficiary’) if you die or become terminally ill. It’s also sometimes just called ‘life insurance’.
  • Total and permanent disability (TPD) insurance: Provides a lump sum payment to you (or a beneficiary) if you become totally and permanently disabled because of illness or injury.
  • Trauma insurance: Provides a lump-sum payment if you are diagnosed with a serious illness or injury. For example, cancer, a heart attack or a major head injury.
  • Income protection insurance: If you can’t work due to serious illness or injury, this insurance covers a portion of your lost income. It’s typically around 70% of your salary or wages.

“Life insurance works much the same way as other types of insurance that cover things like your house or car,” Christine says.

“You pay for the cover that suits you now, to ensure that you’re not left footing a much larger bill if things go wrong later.”

What should I think about before getting life insurance?

First of all, check if you have life insurance through your superannuation. It’s a common inclusion that you might have automatically. You can also request to add to your super.

With this option, the cost of the insurance is factored into your super fees, which are taken from the account balance. This could make it more affordable because you don’t have to use money in the bank. But you would need to keep an eye on your super fees to make sure the cost is reasonable. Especially as women already have lower super balances, on average, than men, which could affect your retirement.

It’s also important to ask lots of questions to help decide if and what type of cover you want.

“The big question people often have is ‘how much cover do I need?’” Christine says.

“Under current laws, only a financial adviser can give you that kind of personal advice.”

That means you’ll need to visit a financial adviser or decide how much cover you need on your own. The Moneysmart website has a calculator that may help (as well as some general information).

In the future, you may also be able to get details directly from insurers, with the government announcing plans for legislation around financial advice reforms in 2024.

“For many people, getting advice has been far too expensive and inaccessible with just 1,000 financial advisers nationwide who help people navigate life insurance products.”

Council of Australian Life Insurers (CALI) CEO Christine Cupitt
Life insurance can protect your income and support loved ones, but it's important to find out as much as you can before making any decisions.

How much does life insurance cost?

Just like any insurance, the premiums for life insurance vary based on factors including:

  • Your gender (as women typically live longer than men, it can help lower the premium)
  • The type of insurance
  • The amount of cover you want
  • The excess
  • Your age
  • Your health and health risks (including if you are a smoker)
  • Your location
  • Your lifestyle or job (if it’s high risk)

To get a basic idea of the cost, we searched online and found a non-smoking, 30-year-old woman could pay around $30 a month for life cover worth $750,000. In comparison a 50-year-old woman who also doesn’t smoke could pay around $70 a month for similar cover.

The Australian Bureau of Statistics also previously reported that Australians spent a combined total of $77 per week on superannuation and life insurance. But this data hasn’t been updated since 2015-16.

So getting a few quotes based on your individual circumstances and the type of cover you want is one of the simplest ways to understand the cost.

Is life insurance tax deductible?

Most life insurance that you pay for outside of your super is not typically tax deductible. The exception is income protection insurance: you can claim a tax deduction for the premium you pay.

You also need to declare any payments you receive from income protection insurance if you make a claim, according to the Australian Taxation Office website.

What if life insurance becomes too expensive?

The cost of living crisis can make it hard to cover everything and still put food on the table. That includes insurance.

But Christine says there are different options available if you already have life insurance.

“To help people continue to protect themselves and their family, life insurers offer a variety of flexible options to help reduce the cost of premiums,” she says.

“These include, but are not limited to, providing premium waivers, discounts and payment plans for people facing financial hardship.”

So you could contact your life insurer, super fund or financial adviser to discuss what will be the most affordable option.

If you need more support, you can also speak to a financial counsellor for free by calling 1800 007 007 or visiting the National Debt Helpline website.

*This article contains general advice only and may not be suitable for your circumstances. Make sure you seek financial advice appropriate to your individual circumstances before making decisions.

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