Difference between full life insurance and term life insurance
The main difference between term life insurance and full life insurance comes down to how long you’re covered for. Full life insurance policies insure whole of life – meaning you will remain covered until you pass away or make a claim. With term life insurance, your cover will eventually expire after a set number of years, or when you reach a certain age, whichever comes first.
Each type of life insurance policy will have its own benefit, so you should always consider your personal needs before deciding which one is right for you. It’s also important to remember that there are no official criteria for either of these types of policies. You may find that some term life insurance policies are very different to others, so don’t expect the same features and benefits across the board.
Comparing full life insurance with term life cover
Here’s a guide to some of the differences between full life insurance with Real Family Life Cover and term life insurance with Real Term Life Cover:
|Real Family Life Cover||Real Term Life Cover|
|Type of life insurance||Full life insurance||Term life insurance|
|Term of Cover||No expiry||Expires after 20 years or when you turn 85
(whichever comes first)
|Benefit amount||$100,000 - $1 million
(depending on age)
|$10,000 - $100,000|
|Eligible age to apply||18 – 64||18 – 79|
|100% benefit paid out in advance if you’re diagnosed with a terminal illness||Yes||Yes
After holding your policy for 12 months
|Cover for Death||Yes
Except for as a result of self inflicted injury in the first 13 months
Cover for Accidental Death only in the first 12 months, then cover for death by any cause thereafter
|Triple Benefit Amount if death is accidental||No||Yes|
|Advanced funeral benefit while your claim is being assessed||Yes
20% of the Life Insurance Benefit
|Optional cover for TPD or Serious Illness||Yes||No|
|No medicals or blood tests required to apply||Yes||Yes|
Life insurance depending on your life stage
The best type of life insurance for you will always depend on your own personal needs, and you may find that some policies are more suitable than others based on your life stage and family’s financial plans.
If you are wanting cover during a certain period in your life – such as your working years while you are raising children or paying off a mortgage, then term life insurance may meet your needs. If you expect that your family will need cover for a longer period, especially as you get older and are worried about funeral costs or final expenses dipping into savings, then a full life insurance policy may meet your needs. This type of cover remains for whole of life, which means the policy will never expire as long as you keep paying your premiums (or don’t cancel or make a claim).
Full life insurance policies may also come with optional insurance covers such as for Total and Permanent Disability or Serious Illnesses1. These can help cover the costs of treatment and rehabilitation, and to financially support yourself and your family if you suffered a lifelong health setback. If you want to cover your family for even more events, especially as you get older, then a full life insurance policy with these benefits may suit you better.
Before taking out life insurance, it’s recommended that you check any existing life cover that you have (such as through your super1), don’t cancel any existing cover until your new application is accepted, check any accrued benefits, the possibility of waiting periods starting again and always read the PDS.
Why consider term life insurance?
With term life insurance you can take out cover at many different age groups, including over the age of 45. Here’s how term life insurance can help based on your family or living situation:
The next years are likely to be your most unpredictable ones as you move in with your partner and make plans to build up your wealth. Term life insurance can help keep your household plans on track in case you passed away or suffered a terminal illness during this time. You may also consider a term life insurance policy to top-up any existing cover that you may have, particularly to reflect any additional needs of your partner.
Put a safety net in place for your family, especially during your children’s important early years. A fixed year term life insurance policy could cover you for most of your mortgage repayment period. You may also consider a term life insurance policy to top-up any existing cover that you may have, particularly to reflect any additional needs of your partner.
With a grown up family, term life insurance can also help take care of their evolving needs. If you were no longer around they won’t be impacted by final expenses such as funeral costs or debts if you pass away during the term of the policy.
You’ve worked hard for decades and deserve to live without financial worries. A term life policy can cover you during your early retirement years, when you no longer have an income to rely on, helping your family cover funeral costs, outstanding debt or relocation/downsizing if you passed away during that time. Or, in case you became terminally ill, you can use the money to pay for palliative care.
Read more about term life insurance benefits