Term Life Insurance
Term life insurance provides death and terminal illness coverage for a specified period or until a certain age, typically with annually increasing premiums. It's the most common and affordable type of life insurance in Australia, offering flexibility to adjust coverage as your needs change.
Detailed Explanation
Common Misconceptions
- •Term insurance becomes unaffordable in later years - while premiums increase with age, proper planning and coverage reviews can maintain affordability
- •You lose all your money if you don't die during the term - life insurance is protection, not an investment; you're paying for peace of mind and financial security
- •Term policies automatically cancel at a certain age - most modern Australian term policies are renewable and can continue well into your 70s or 80s
Real-World Examples
David, 30, purchases a $500,000 term life policy with 30-year coverage to match his mortgage term. His initial premium is $35/month, gradually increasing as he ages, but the coverage reduces his family's financial risk
Emma, 45, has a $300,000 term policy through her super fund that automatically increases by 3% annually for inflation, ensuring her coverage keeps pace with cost of living increases
Robert, 55, converts his term life insurance to a whole of life policy without medical underwriting, locking in permanent coverage for his estate planning needs
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Related Terms
Explore related insurance concepts
- Life InsuranceLife insurance provides a lump sum payment to your nominated beneficiaries when you pass away or are diagnosed with a terminal illness. It's designed to protect your family's financial future by covering debts, living expenses, and education costs after your death.
- Stepped PremiumsStepped premiums increase annually based on your age, typically rising 3-7% each year as your insurance risk increases. They start cheaper than level premiums but become more expensive over time, making them suitable for short-term coverage or younger people expecting income growth.
- Level PremiumsLevel premiums remain constant for a specified period (typically 5-10 years) or your entire life, providing cost certainty and protection against age-related increases. They cost more initially than stepped premiums but save money long-term, particularly for permanent coverage needs.
- Sum InsuredThe maximum amount an insurance company will pay out if you make a valid claim. This is the total coverage amount you select when purchasing a policy, such as $500,000 for life insurance or $100,000 for trauma insurance.