Factors to Consider When Choosing a Life Insurance Policy

Life Insurance

Despite the fact that most Australians appear to be unaware that their superannuation includes a default life insurance policy, a recent poll found that 37% of households still do not have life insurance.

The Federal Government introduced laws in 2019 that effectively removed life insurance coverage from idle super accounts that have been inactive for 16 months and have never had balances more than $6,000, as well as new super account holders under the age of 25.

Hundreds of thousands of Australians would have lost their only source of insurance by this time. Life insurance can be a lifesaver in difficult circumstances, and it’s something that should be seriously considered. And if you’re thinking about acquiring insurance, the amount of coverage you need can be your first concern.

We put together this quick guide to assist you figure out what components you’ll need to compute to achieve the proper figure.

Factors to consider for life insurance

People get life insurance for a variety of reasons. As a result, there are various types of life insurance, such as.

  • Term life insurance covers you for a set number of years, or a ‘term’, as stated in the policy. A death benefit is given to the beneficiaries if the insured dies during or within the stipulated time period when the policy is active. It is often less expensive, but it has no financial value other from the policy’s guaranteed death payout.
  • Whole life insurance is a type of life insurance that is permanent. As long as the premiums are paid on time, the insured individual is covered for the rest of their life. It is the most common type of permanent life insurance policy, and it includes a savings or cash value component.
  • Another sort of permanent life insurance is universal life insurance. In this situation, the insured individual is protected for the rest of their life as long as they pay their premiums and follow the policy’s other criteria. Universal life insurance provides lifelong protection and includes a savings component or cash value. The policy also includes a death benefit that will be paid to the beneficiaries if the covered person passes away.

Most people’s major goal is to ensure their family’s financial security when they pass away.

If this is also your primary goal, the answers to the following questions will assist you in determining the appropriate amount:


  • How much money does your family require each year for living expenses?
  • How long do you wish to supply your family with enough money to support their living expenses?
  • Is your partner employed? Would they function if you died if they didn’t?
  • How much does your spouse contribute to your household budget if they work?
  • How many students are enrolled in school?
  • How much should you leave to pay your children’s education?
  • What is the total amount of debt you owe? Do you owe money on a mortgage, a loan, a credit card, or a medical bill?
  • When you die, how much will your funeral costs be?
  • Do you have any investments or savings?

Furthermore, the following factors may influence the cost of your insurance:

  • What is your age?
  • Whether you have any medical conditions that need to be addressed
  • Term of insurance
  • The death benefit’s amount
  • Whether or not the policy has a monetary value

In general, the earlier you begin, the lower your rates will be. If you’re in good health and don’t smoke, you can reduce the cost of your life insurance even more.

How much life insurance do you need?

After you’ve answered the above questions, you can use an online life insurance calculator to obtain an approximate sense of how much coverage you need.

The easiest approach to figure out how much life insurance you need is to get guidance from a licensed life insurance or financial expert. They can assist you figure out how to get the coverage you need while also showing you options for short-term needs.

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