What does life insurance cover in Australia?

Life insurance (also called death cover or life cover) in Australia pays a lump sum to your beneficiaries if you die, and in many cases if you are diagnosed with a terminal illness. It can help cover the cost of your debts, mortgage repayments, living expenses or future financial needs.

What is the difference between ‘stepped’ and ‘level’ premiums?

Stepped premiums increase periodically (often each year) as you age or your risk changes. Level premiums are higher at the start but increase much more slowly because the insurer locks in more of the risk early. Choosing the right type affects how much you pay over time.

Do I need TPD (Total & Permanent Disability) cover?

You might need TPD cover if you rely on your income, have a mortgage or dependants and would face serious financial hardship if you became permanently unable to work. The suitability depends on your job, savings and other protections.

Should I take insurance inside my super fund or direct outside super?

Holding life, TPD or income protection cover inside super can offer cheaper premiums and automatic deductions, but cover is often more limited and linked to your super account status. Buying outside super offers more flexibility, but you’ll pay premiums directly and handle them yourself.

How can I decide how much life cover I need?

To estimate how much life cover you need, add up your debts (e.g., mortgage, loans), future financial commitments (such as children’s education) and living expenses, then subtract your savings or existing cover. A broker or an online calculator can help fine-tune it to your situation.

Why use a broker instead of buying insurance directly online?

A broker can provide access to multiple insurers, interpret complex policy definitions, help you compare not just premiums but policy quality (insurer reliability, cover definitions, exclusions), and review your cover as your life circumstances change.

Understanding Insurance

Understanding Life Insurance

Making Sense of Protection for You & Your Family

Insurance can feel complex—but at Covermate Life, we believe the more you understand, the better equipped you are to choose the right cover. This guide walks you through the key types of life and disability cover, explains how premiums work, and helps you choose policies that suit your situation in Australia.

1. What insurance covers

Here are the major types of cover commonly available:

Life (Death & Terminal Illness) Cover – A lump-sum benefit paid to your beneficiaries if you die, or in many policies when you are diagnosed with a terminal illness.
Total & Permanent Disability (TPD) Cover – A lump-sum payment if you become totally and permanently disabled and can no longer work in your occupation (or any occupation) depending on the definition.
Trauma / Critical Illness Cover – A benefit paid if you suffer a defined major illness (e.g., heart attack, stroke, certain cancers) or injury.
Income Protection Cover – A monthly benefit that replaces a portion of your income if illness or injury prevents you from working for a defined period.

Each of these cover types has a different purpose — you might need one, several, or all, depending on your financial commitments, dependants and risk tolerance.

2. Stepped vs Level premiums

Understanding how your premium is structured is key:

Stepped premiums: These are recalculated at each renewal (often yearly) and typically increase as you age or your risk profile changes.
Level premiums: You pay a higher premium at the start, but increases (if any) are smaller and less frequent because the insurer locks in more of the risk earlier.

Choosing between the two can have a major impact on your total cost of cover over time — and how affordable it remains as you age.

3. How much cover do I need?

There’s no one-size-fits-all answer, but you can think about your needs by asking:

What debts would remain if I died (mortgage, loans, etc.)?
Would someone else need to support me (e.g., a partner, children)?
What ongoing living costs or future costs (education, medical, retirement) would need to be covered?
What assets or savings exist that might reduce the level of cover I need?

In Australia, getting cover earlier when you’re younger and healthier generally yields better value.

4. Cover inside Super vs Outside Super

An important distinction that many don’t fully grasp:

Inside superannuation: Some life, TPD and income protection insurances are available through your super fund. You may get cheaper premiums because the fund buys in-bulk. However, cover is often limited, eligibility criteria stricter, and your super balance can be drained by premiums.
Outside superannuation: You can buy stand-alone policies direct with insurers or via brokers like us. More flexibility, often broader cover, but premiums are paid personally (not via super).
Make sure you understand how your cover is held — it affects tax, claims, portability, and how it fits into your broader financial plan.

5. Choosing the right insurer and policy

When comparing policies, consider:

The insurer’s claims-paying history (Are they reliable when you need them?).
The definitions of TPD (‘own occupation’ vs ‘any occupation’) — this can make a big difference.
Whether the policy has exclusions or loadings (based on health, hobbies, occupation).
What happens if your circumstances change (e.g., you change jobs, your income changes, you suffer injury).
Reviewing your cover regularly (especially after major life events: marriage, children, new job, illness).
We at Covermate Life help you compare policies from Australia’s leading providers and tailor solutions to your situation.

6. Why talk to a broker like Covermate Life?

As a specialist life insurance broker based in Sydney and serving Australia, we help you in several ways:

We give independent advice (we’re not locked to a single insurer).
We help you compare multiple insurers so you find the right fit, not just the lowest premium.
We interpret complex policy wording and make sure you understand what you’re signing up for.
We assist you as your life changes, not just at the point of sale.
Our mission is simple: make life insurance simple, accessible, and stress-free.

7. Key take-aways

Insurance isn’t just “something you buy”; it’s protection for you and your loved ones.
Choose cover types that match your risks, income and financial commitments.
Premium structure (stepped vs level) and policy definition matter more than you might think.
Where your policy is held (in super or outside) dramatically affects how it works.
A great policy with unclear wording or a weak insurer is still a weak policy — so pay attention to both provider and product.
Review your cover regularly — as you age, your commitments change, so should your cover.

Remember: life insurance isn’t optional if you have dependants, debts or income to protect — it’s a strategic part of your financial planning.