Benefits of having life insurance: Is it worth the costs?

11 November 2019

Life insurance can be an invaluable tool in planning for your future, but there are also a few common costs and pitfalls to be aware of.

If you have considered taking out life insurance, or are undecided about taking out a policy, it is worth considering some of the potential benefits and downsides of having a policy in place.

We outline some of these factors below, but you should also do your own research and decide if life insurance is suitable for you before taking out a policy. 

Potential benefits of life insurance

Life insurance may provide peace of mind 

If you have dependents, whether that’s a spouse, children or both, life insurance can help give you confidence that they will be more financially secure if something happens to you. 

Your life insurance needs will likely be different depending on whether you have a spouse, children, both, or neither, so it’s important to do a thorough assessment of your financial situation and the costs your dependents would need to cover in the event of your death. 

Life insurance can potentially cover unexpected costs resulting from terminal illness

Depending on your policy, life insurance may not just pay a benefit in the event of your death; it can also potentially provide cover if you are diagnosed with a terminal illness. 

The financial ramifications of terminal illness can be tough. Even if you have private health insurance, you may still have to pay a significant amount in hospital and doctors’ bills. If your life insurance policy provides cover for terminal illness, you may receive a payout or benefit to help reduce the financial burden of your illness. 

It’s important to note that many life insurance providers stipulate a “maximum time left to live” condition that you must satisfy to claim a benefit for terminal illness. The exact time period varies by provider, but is usually between 12 and 24 months. Some insurers may also require documentation such as medical certificates or history in the event of a claim. 

Life insurance can be flexible 

Life insurance is a complex product, and you shouldn’t rush to take out a policy before thinking long and hard about your personal circumstances and whether they necessitate having a life insurance policy in place. 

However, if you do decide to take out a life insurance policy, there are a lot of options out there to choose from. The market contains a range of policies suitable for most occupations and life stages, and most policies offer a wide range of benefit options. 

Potential drawbacks of life insurance – is it worth the cost?

When considering if life insurance is right for you, one of your main concerns may be what you’ll pay in premiums, and whether the benefits will justify the costs. To give you an idea of life insurance costs for men and women of different age groups and smoking statuses, Canstar Research has calculated the average monthly premiums across the life insurance providers we rate.

Average monthly premiums: Female Average monthly premiums: Male
Age Smoker Non-smoker Smoker Non-smoker
20s $52.78 $33.38 $79.28 $49.29
30s $60.39 $36.62 $86.40 $47.24
40s $120.00 $65.72 $166.38 $81.41
Early 50s $216.67 $120.17 $322.63 $161.50
Late 50s $339.65 $197.67 $556.52 $293.06

Source: Premiums current as of 07/06/2019. Based on $500,000 of cover for direct life insurance policies rated by Canstar in 2019.

While only you can decide whether life insurance is something you need at your current life stage, having an idea of what you could pay in premiums may make it easier for you to decide. 

Also consider some of the other potential drawbacks when it comes to life insurance. These can include the exclusions (such as suicide) that insurers may not cover in the event of a claim, as well as pre-existing medical conditions you need to disclose when you take out a policy which also may not be covered. In addition, consider the various pros and cons of having life insurance through your superannuation – and indeed whether you need professional financial advice – before deciding which type of cover might be most suited to your needs.


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