The beginner’s guide to life insurance

Last updated: March 2026

If you’re new to life insurance, you may be wondering how it works, what it covers, and whether it’s something you really need. This guide breaks it all down in simple terms, so you can make an informed decision about protecting the people who matter most.

Key takeaways

• Life insurance pays a lump sum to your beneficiaries if you pass away or are diagnosed with a terminal illness depending on the circumstances
• It helps your loved ones manage everyday expenses like mortgage repayments, bills, and education costs if you are no longer around to help support them
• The amount of cover you need depends on your income, debts, and dependants
• The two main types of life insurance are term life and life insurance
• Real Life Insurance offers flexible cover options to suit different life stages and family needs

What’s life insurance?

Life insurance is a contract between you and an insurer. Typically you pay regular premiums, and if you pass away or are diagnosed with a terminal illness (as defined in the PDS), your chosen beneficiaries receive a lump sum payment.

It’s designed to give your loved ones financial security when they need it most. That lump sum can help them pay the mortgage, manage household bills, cover school fees, or take time to grieve without added financial pressure.

Thinking about life’s “what-ifs” can be difficult, but the right cover can help you feel confident that your family’s future is protected.

Why do people get life insurance?

Many Australians choose life insurance to make sure their loved ones are financially supported if something unexpected happens. It’s typically most common for those who have dependants or major financial commitments.

Common life stages and situations where people take out cover include:

• Starting or growing a family
• Buying a home or taking on a mortgage
• Carrying significant debt, such as personal loans or credit cards
• Starting a new job or business

For example, a couple with young children might take out life insurance so their partner could continue paying the mortgage and childcare costs if one of them passed away or were diagnosed with a terminal illness.

Life insurance can help turn a difficult time into one where financial stability remains possible.

How much life insurance do I need?

There’s no one-size-fits-all amount. One person may only need $200,000 in cover and another may require $1,500,000. It all depends on your personal financial circumstances.

To get a clearer idea of what’s right for you, visit the Real Life Insurance calculator and see how much cover could suit your situation.

What are the types of life insurance?

Life insurance generally comes in a few different forms.

Term life insurance provides cover for a set period of time, such as 10, 20 or 30 years.

Real Life Insurance works a little differently. It offers renewable cover, which continues from year to year as long as premiums are paid. The cover amount stays the same unless you choose to change it, but premiums typically increase over time based on age.

Term life insurance

• Cover duration: Provides protection for a set period, such as 10, 20 or 30 years or until a chosen age, then ends
• Benefit: Pays a lump sum if you pass away or are diagnosed with a terminal illness during the term. Typically has a guaranteed cash payout when your cover expires
• Typical purpose: Covering the years while you’re paying off a mortgage, raising children, or building savings
• Best suited for: People who want higher cover for a defined need and timeframe, usually at a lower cost than permanent cover

Real Life Insurance

• Cover duration: Renewable each year, typically no set expiration date, as long as premiums are paid. Some policies may have a maximum policy term applied to your cover based on your responses in your application
• Benefit: Pays a lump sum to your beneficiaries if you pass away or are diagnosed with a terminal illness)
• Typical purpose: Helping your family stay financially secure – from paying off debts to maintaining everyday living costs
• Best suited for: Long-term estate planning providing financial support for dependants

Optional cover

Some life insurance policies will have optional cover that you can choose to include. For example, Real Life Insurance offers Children’s Insurance and Serious Illness Insurance.

Serious Illness Insurance

• What it is: Pays a lump sum if you’re diagnosed with a specified serious illness (listed in the PDS)
• How the benefit can be used: To help cover medical bills, rehabilitation costs, or day-to-day living expenses while you recover
• Who it’s for: Anyone wanting additional protection against the financial impact of serious illness

Children’s Insurance

• What it is: Provides a lump sum if your child experiences a specified serious illness (listed in the PDS), injury, or passes away
• How the payout can be used: For medical expenses, schooling costs, or time off work to focus on care
• Who it’s for: Parents or guardians who want financial support in place if their child is affected by a defined illness, injury, or death, helping their family manage costs and focus on care during a difficult time

How to get life insurance

Getting life insurance in Australia is typically straightforward. Here’s how the process usually works.

Figure out how much cover you need

Start by reviewing your income, debts, and family expenses. Consider how much money your loved ones would need if you weren’t around.

Choose a policy type

Decide between a term life insurance policy or a more long-lasting life insurance policy, based on your budget and how long you’d like protection to last.

Compare options

You can obtain a life insurance policy directly from an insurance provider like Real Insurance, through a financial adviser, or within your super fund. Comparing options helps you find suitable cover for your needs.

Complete an application

You’ll usually need to answer questions about your health, lifestyle, and medical history. Some insurance providers may include a medical assessment. With Real Insurance you can apply over the phone with no medical or blood tested needed.

Accept the policy and pay premiums

Once approved, accept the policy and pay your first premium to activate cover. Most policies include a cooling-off period (usually 30 days) where you can cancel for a full refund if you change your mind.

Nominate beneficiaries

List the people who’ll receive the payout. You can update your beneficiaries later if your circumstances change.

Tips for beginners

Here are a few practical tips to help first-time buyers feel confident about choosing the right life insurance policy to suit their needs:

• Understand your limits: Know your policy’s exclusions and waiting periods
• Stay truthful on your application: Accurate information helps ensure claims are processed smoothly
• Keep beneficiaries up to date: Review nominations after major life events like marriage/divorce or the birth of a child
• Consider continuous cover: Some policies, like Real Life Insurance, automatically renew each year as long as premiums are paid
• Review your policy regularly: Check it still meets your needs as your life changes
• Seek advice if needed: For more complex situations, a qualified financial adviser can help you decide on suitable cover levels

FAQsFrequently Asked Questions

What are the eligibility requirements?

You’ll generally need to be an Australian resident aged between 18 and 74 to apply for life insurance.

What are the exclusions and waiting periods?

Exclusions vary by insurer. For example, Real Life Insurance will not pay a benefit amount if death, or diagnosis of a terminal illness, is as a result of an intentional self-inflicted injury, within the first 13 months of holding the policy. won’t pay a benefit if death is due to suicide or intentional self-injury within the first 13 months. There may also be exclusions depending on the answers you provide in your health and lifestyle questions during the time of application. Always read the Product Disclosure Statement to understand what’s covered and any applicable waiting periods.

Am I only covered if I’m in Australia?

This will depend on your policy, but for Real Life Insurance, if you’re an Australian resident, we can continue to cover you while you’re overseas. However, it’s important to check your policy for any country-specific terms, limits or exclusions.

Can I claim a tax deduction for the premiums?

Generally, life insurance premiums aren’t tax-deductible in Australia. However, income protection insurance premiums may be. For personalised tax guidance, check with a registered tax adviser.

How much does life insurance cost?

Premiums depend on factors such as your age, cover amount, and lifestyle. You can request a quick quote online from Real Insurance or call on 1300 377 325. Some policies, including Real Life Insurance, may not require a medical check as long as you answer a few health and lifestyle questions.

Thinking about the unexpected isn’t easy, but preparing for it can make all the difference. Life insurance offers a practical way to protect your family from financial hardship if something happens to you. Learn more about Real Life Insurance today.