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Life insurance in Australia pays a tax-free lump sum to your nominated beneficiaries if you die, or to you directly if you are diagnosed with a terminal illness with less than 12–24 months to live. It is designed to replace lost income, pay off debts, and provide financial security for dependants.
A common starting point is 10–12 times your annual income, plus enough to pay off all outstanding debts (including your mortgage). You should also factor in future financial obligations: childcare, school fees, and the long-term income needs of your dependants. Your super fund may hold some life insurance — check your existing cover before purchasing additional standalone cover.
Standard exclusions include death from suicide within the first 13 months of the policy, death resulting from an undisclosed pre-existing condition, and death while engaging in specified high-risk activities (e.g. unlicensed aviation, certain extreme sports). War and act of terrorism may also be excluded. Life insurance does not cover disability or income replacement — those require separate TPD and income protection covers.
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