Comprehensive definitions of insurance types available in Australia, regulated by ASIC and APRA
19 terms in this category
Life 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.
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.
Whole of life insurance provides permanent coverage for your entire lifetime with level premiums that never increase. It guarantees a payout whenever you pass away, making it ideal for estate planning, funeral expenses, and leaving a legacy, though it's significantly more expensive than term insurance.
TPD insurance pays a lump sum if you become totally and permanently disabled and unable to work again. It covers medical costs, rehabilitation, home modifications, debt repayment, and lost future income. TPD definitions vary between 'any occupation' and 'own occupation' standards.
Own occupation TPD insurance pays out if you're permanently unable to work in your specific occupation due to illness or injury, even if you could work in another field. It offers the broadest protection and easiest claims process but costs 30-50% more than 'any occupation' coverage.
Any occupation TPD pays out only if you're unable to work in any job you're reasonably suited for based on your education, training, and experience. It's more restrictive than own occupation TPD but costs 30-50% less, making it the standard coverage in most superannuation funds.
Income protection insurance replaces up to 75% of your income through regular monthly payments if you can't work due to illness or injury. It covers temporary disabilities with benefit periods from 2 years to age 65, helping maintain your living standards while you recover.
Salary continuance insurance is income protection insurance held within superannuation. It provides monthly income replacement if you can't work due to illness or injury, with premiums paid from your super balance. The terms are generally identical to income protection, but with different tax treatment.
Trauma insurance (also called critical illness or recovery insurance) pays a lump sum when you're diagnosed with a serious medical condition like cancer, heart attack, or stroke. It covers medical costs, recovery expenses, and income loss during treatment, regardless of your ability to return to work.
Key person insurance protects businesses against financial loss if a critical employee dies or becomes disabled. The business owns the policy, pays premiums (typically tax-deductible), and receives the payout to cover lost revenue, recruitment costs, and business stabilisation while replacing the key person.
Business expenses insurance pays the ongoing fixed costs of running your business (rent, utilities, salaries, loan repayments) if you can't work due to illness or injury. It's designed for business owners and self-employed professionals, providing monthly payments for up to 12-24 months.
Buy-sell insurance funds ownership transfer in businesses with multiple partners or shareholders. If an owner dies or becomes disabled, the insurance provides funds for surviving owners to purchase the departing owner's share, ensuring business continuity and fair compensation for the family.
Mortgage protection insurance pays off your home loan if you die, become disabled, or can't work. It can be structured as decreasing cover that reduces with your mortgage balance, or level cover that maintains a fixed payout. Often combined with life insurance, TPD, or income protection.
Funeral insurance provides a lump sum (typically $5,000-$15,000) to cover funeral and burial costs when you pass away. It offers guaranteed acceptance regardless of health, level premiums, and immediate coverage, though it's often more expensive than equivalent term life insurance.
Child insurance provides trauma/critical illness coverage for children (typically ages 0-18), paying a lump sum if they're diagnosed with serious medical conditions like cancer, cerebral palsy, or congenital disorders. It covers medical costs, family income loss, and ongoing care expenses.
Group insurance is life, TPD, income protection, or trauma coverage provided to multiple people under a single master policy, typically through employers or superannuation funds. It offers simplified acceptance and lower premiums through group discounts, but may provide less comprehensive coverage than retail policies.
Retail insurance refers to individually underwritten life, TPD, income protection, or trauma policies purchased directly from insurers or through advisers, separate from superannuation. It offers more comprehensive coverage, flexible definitions, and portability, but typically costs more than group insurance.
Stepped 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 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.