What is life insurance?

Life insurance is a way for you to provide for your loved ones, should you die in an accident or from an illness.  It protects the people who depend on you to look after them. 

If you die prematurely, life insurance provides a tax-free payout1  to your dependents. This money can be used to replace income from your salary, or cover expenses such as funeral and legal costs, child-care and housekeeping. This is why it’s a good idea for both you and your partner to have life insurance.

There are two main kinds of life insurance:

  1. Protection policies provide a lump sum payout (decided when the policy is taken out) in the event of the policy holder’s death

  2. Investment policies aim for capital growth, the money you pay in the form of regular premiums plus the interest earned on that money is paid out in full when the policy is claimed  
Not all life insurance policies in Australia are the same. Some cover other life-changing events such as terminal illness or critical injury.

The Difference between Trauma Insurance and Life Insurance

Trauma insurance, or major illness insurance, pays out a lump sum should you be struck down by a sudden and serious illness such as cancer, stroke or a heart attack. 

You can use this money to support yourself and your family while you recover from your illness, thereby avoiding the pain of financial hardship during an already stressful time.

Find out more about the Optional Illness and Injury cover available to you 

For more insights into how you can protect your family, also see:

The benefits of having life insurance
What does life insurance cover
Income protection insurance

Exceptions apply such as when cover is used for some business purposes and for non-financially-dependent beneficiaries of life cover under a superannuation plan. Taxation advice specific to your circumstances is recommended.