Term life insurance in Australia
Term life insurance pays a lump sum to the people you choose if you die while the policy is in force, and most policies also pay early if you are diagnosed with a terminal illness. It is also called life cover or death cover, and it is the core of almost every life insurance policy sold in Australia.
"Term" means it covers you for a period rather than building up a savings value. If you cancel, stop paying or outlive the cover, nothing comes back to you. That keeps it far cheaper than a savings-linked policy, and it means the decisions that matter are how much cover you hold, how long you keep it, and how the premium will move as you get older.
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General advice only. It doesn't consider your circumstances. Read the PDS and TMD before you decide.
Free tools
- Life insurance calculator: Work out how much life and TPD cover you need.
What term life insurance pays for
The death benefit is a single lump sum, set when you take out the policy. The people who relied on your income can use it however they need to: clearing the mortgage, paying off credit cards and car loans, covering childcare and school fees, or simply replacing the income the household has lost while it adjusts.
Most policies include a terminal illness benefit. It pays the same lump sum early if a doctor certifies that you have an illness expected to lead to death within a limited period, which the policy defines in months. Getting the money while you are alive can pay for care, time off work for your partner, or settling debts on your own terms.
Who receives the money depends on how the cover is held. Outside super, it goes to the beneficiaries you nominate on the policy, or to your estate if you haven't nominated anyone. Inside super, the fund trustee pays it under superannuation law, and unless you have a valid binding nomination the trustee decides who gets it. Moneysmart reports that ASIC's 2025 review of super death benefit claims found almost 60% of members had no beneficiary nominated and only 10% had a binding nomination, which slows claims down.
Term life vs whole of life insurance
Whole-of-life and endowment policies combined life cover with an investment that built up a cash (surrender) value. APRA's guidance to super trustees refers to them as legacy products, and they are not what you are offered when you ask for a life insurance quote today. Current life cover is almost always risk-only term cover: you pay for the protection and nothing else.
If you hold an old whole-of-life or endowment policy, it may have a surrender value, and cancelling it could mean giving up guarantees that are no longer on sale. Get the current surrender value in writing and consider advice before you cancel or replace it.
| Feature | Term life (risk-only) | Whole of life / endowment (legacy) |
|---|---|---|
| What it pays | A lump sum on death or terminal illness while the cover is in force | A lump sum on death, plus a savings value that builds up over time |
| Money back if you cancel | Nothing | A surrender value, which may be less than the premiums paid |
| Premium | Lower for the same cover, because you only pay for the risk | Higher, because part of each premium is invested |
| How long it lasts | Until you cancel, stop paying or reach the policy's expiry age | Usually for life, or until the endowment matures |
| Where you find it today | Sold by insurers, advisers and super funds | Mostly older policies still held from decades ago |
How long term cover lasts
Retail term cover normally renews every year until an expiry age written into the policy, as long as you keep paying. Moneysmart notes that outside super you may be able to keep life cover for as long as you pay the premiums, while life cover inside super usually ends at age 70 and TPD cover in or out of super usually ends at 65.
Every policy also has a maximum entry age, which is lower than the expiry age. That gap matters later in life: cover you already hold can often continue past the age at which you could buy it new. Before cancelling an old policy to replace it, make sure the new one will actually accept you.
What decides your premium
Insurers price life cover on your age, health, job and lifestyle. Moneysmart lists what they usually ask about: your age and occupation, your medical history and family health history, smoking, and high-risk hobbies or sports. The cover amount and the premium structure you choose do the rest. A health condition or dangerous job doesn't always mean a refusal. More often it means a loading (a percentage added to the standard premium) or an exclusion for that condition.
- Age: the risk of a claim rises every year, so the price does too on a stepped premium.
- Smoking and vaping: smokers are rated separately and pay more. Answer the question honestly, including for vapes.
- Health and family history: conditions you have, and some that run in your family, can lead to a loading or an exclusion.
- Occupation: manual and hazardous jobs can cost more, mainly for TPD and income protection attached to the policy.
- Cover amount and optional extras: more cover, TPD, trauma and indexation all add to the premium.
Stepped or level premiums (variable age-stepped or variable)
Moneysmart now uses the terms variable age-stepped (previously stepped) and variable (previously level). Stepped premiums are recalculated at each renewal based on your age, so they start cheaper and climb. Level premiums start higher but are not driven by your age, so they generally rise more slowly. Neither is guaranteed: insurers can still reprice either type across the board, and Moneysmart warns that premiums may change every year.
The right choice depends on how long you will hold the cover. Level premiums tend to pay off only if you keep the policy for many years. If your need for cover will shrink as the mortgage falls and the kids leave home, a stepped premium on a reducing sum insured can cost less overall.
| Variable age-stepped (stepped) | Variable (level) | |
|---|---|---|
| How it's set | Recalculated each year using your age at renewal | Set on your age when you start, then not recalculated for age |
| Early years | Cheaper | More expensive |
| Later years | Rises every year as you get older | Rises more slowly |
| Can the insurer still increase it? | Yes, rates can change at renewal | Yes, rates can change at renewal |
| Tends to suit | Shorter-term needs, tight budgets now, cover you plan to reduce | People confident they will hold the cover for a long time |
Where to buy term life cover and get quotes
There are three ways to get term life quotes and buy cover. Each suits a different person, and many households use more than one: default cover in super as a base, topped up with a policy outside super.
The channel also changes how often claims are paid. APRA's figures for the 12 months to 31 December 2025 show insurers admitted 98.1% of finalised death claims on group cover in super, 97.0% on policies sold through advisers and 92.2% on policies bought direct. Moneysmart's claims comparison tool breaks the same data down by insurer.
| Channel | How it works | Underwriting | Death claims admitted, 2025 | Watch for |
|---|---|---|---|---|
| Through your super fund | Default cover for eligible members, paid from your super balance | Default cover usually needs no medical checks; increases usually need health questions | 98.1% | Default amounts can be well below what a household needs, and cover can end if the account goes inactive |
| Direct from an insurer | You apply online or by phone and choose the cover yourself | Health and lifestyle questions; some policies ask few or none | 92.2% | Moneysmart warns that a policy that doesn't ask about your health may have more exclusions or narrower definitions |
| Through a financial adviser or broker | Personal advice across several insurers, with help at claim time | Full underwriting, often with more product choice | 97.0% | Advisers are paid by commission, a fee or both. Ask how, and get it in writing |
How much term life cover you need
Moneysmart's method is a subtraction. Add up what your family would need: the mortgage and any other debts, childcare, school fees and ongoing living costs for the years they would need support. Then subtract what they would receive: super (including any insurance in it), savings, investments that could be sold, your paid leave balance and realistic family support. The gap is the cover to aim for.
Writing down a number before you compare stops you being steered to whatever cover amount a sales script suggests, and it means you can compare quotes like for like. Our life insurance calculator runs the same sum for life and TPD cover side by side.
Keeping, reducing or cancelling term life cover later in life
Term cover is meant to shrink as your debts and dependants do. Review it when the mortgage is paid down, the children leave home or you retire. Reducing the sum insured lowers a stepped premium and keeps the terms you were accepted on years ago. Cancelling ends the cover, and a new application later in life can bring exclusions, a loading or a refusal.
Know when your cover stops. Moneysmart says life cover in super usually ends at 70, while outside super you may be able to keep it for as long as you pay. If you're thinking of replacing a policy, insurers that follow the Life Insurance Code of Practice will tell you not to cancel your existing cover until the new application is accepted, and explain the risks, such as losing benefits you've built up or waiting periods starting again. Life insurance for over 60s covers what changes at 60, 65 and 70.
General advice only. This information doesn't take into account your objectives, financial situation or needs. Consider whether the product is right for you and read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you decide. We don't compare every product in the market, and we may earn a commission if you take up a product through our links.
What to watch for
- Answer every application question accurately. Since 5 October 2021 you must take reasonable care not to make a misrepresentation, and a careless or false answer can let the insurer change or cancel the cover, or refuse a claim.
- Check what counts as a terminal illness in the PDS, including the life-expectancy period, before you rely on the early payment.
- If the policy bundles TPD or trauma with life cover, a payment under those usually reduces the life cover by the same amount.
- Cover in super may stop if your account is inactive for 16 months or your balance runs out. Check it each year.
- Don't cancel an existing policy until the replacement is in force and you know whether it excludes anything the old one covered.
- Check the suicide exclusion. Term life policies commonly don't pay on death by suicide in the first 13 months: CommBank's life insurance PDS (issued by AIA Australia, 27 March 2025), for example, excludes it for 13 months from the start or reinstatement of cover, and for 13 months on any increase.
- Don't mistake accidental death insurance for life cover. Moneysmart says accidental death insurance only pays if you die from an accident, not from an illness, disease or suicide, and often has a lot of exclusions.
Common questions
What happens after 10 years of paying life insurance?
The cover simply continues while you keep paying, until the policy's expiry age. Term life is risk-only cover, so nothing is paid back for the years without a claim. Ten years in is a good time to review the cover amount, because debts and dependants change, and to compare your current premium with what a stepped premium will cost from here.
What happens after 30 years of term life insurance?
If the policy hasn't reached its expiry age, it keeps going while you pay. Retail term cover renews each year to an expiry age written into the policy, so after 30 years the questions are whether you still need it and what the premium has risen to. If it ends or you cancel it, nothing is refunded.
What is term life insurance?
Term life insurance pays a lump sum to your nominated beneficiaries if you die while the policy is in force, and usually pays early if you are diagnosed with a terminal illness. It has no savings or cash value, so nothing is paid back if you cancel or outlive the cover.
What is the downside of term life insurance?
The main downsides are that you get nothing back if you never claim, and stepped premiums rise every year with your age, which can make cover expensive in your 50s and 60s. Cover also ends at the policy's expiry age.
Do I get my money back if I outlive my life insurance?
No. Term life insurance is risk-only cover, so the premiums pay for protection during the years you held it. Only older whole-of-life or endowment policies built up a surrender value.
At what age should you stop term life insurance?
There is no set age. Cover makes sense while someone depends on your income or would be left with debts. Many people reduce their cover as the mortgage shrinks and children become independent, and stop when their super and assets would cover those needs on their own.
How much does a $1,000,000 life insurance policy cost per month?
There isn't one price. The premium for the same sum insured varies widely with your age, smoking status, health, occupation, the premium structure and the insurer. The only reliable figure is a quote on your own details, so compare several on the same cover amount and structure.
Is term life insurance tax deductible?
No. The ATO says life insurance premiums are not deductible when you hold the policy personally. Premiums paid through super come out of your super balance, not your take-home pay.
General information only
This page explains how term life insurance works in Australia. It is not advice about your own situation. Read the product disclosure statement and target market determination for any policy you consider, and speak to a licensed financial adviser if you want a recommendation.
Protecting your income as well
Life, TPD and trauma cover pay lump sums. Income protection is the cover that pays a monthly income while you recover.