Understanding the 4 Types of Life Insurance in Australia

There are various types of insurance, but there is only one that is very personal. Life insurance can provide you with peace of mind knowing that if anything were to happen to you, you and your family will be financially secure to tackle the unexpected.

1 in 3 Australians don’t understand life insurance and don’t buy adequate cover.1

Because of its importance, it’s crucial to do further research into which life insurance cover may be most beneficial to you and your loved ones. Before purchasing life insurance cover it’s critical to check the product disclosure statement (PDS) for the definition and what is excluded. 

Life insurance policies include: 

  • Life Cover, 
  • Trauma Insurance, 
  • Income Protection, 
  • Total and Permanent Disability (TPD) Insurance.

You may want to consider consulting a financial adviser to learn more about the different types of life insurance you can take advantage of. 

Read on to know more about the different kinds of life insurance available that you could find most beneficial to you.

1. Income Protection Insurance

Income protection insurance can cover your financial needs if you become unable to work due to an injury or sickness. This type of life insurance offers you a dependable income stream, so you can focus on resting and getting better! 

You can calculate your payments based on your pre-tax income. Typically, you should be able to get paid monthly, in contrast to a lump sum payment.


2. Life Cover

The standard type of life insurance that most people are familiar with is the life cover. This can help your family or other nominated beneficiaries with their finances if you passed away, as it offers a lump sum payment. This can help eliminate some stress that can occur during such an emotional time for your loved ones. 

While most people generally have some form of life cover, statistics reveal many still don’t have enough coverage. 

So, it will be best to consider taking out a life cover if you have a spouse, children, or other relatives and loved ones who may need financial assistance once you pass away.


3. Total and Permanent Disability Insurance

This type of life insurance pays a lump sum benefit if you become totally or permanently disabled due to an injury or sickness. After all, your disability will prevent you from going back to work and earning an income.

Almost 1 in 2 Australians believe they have a less than 10% chance of losing income due to disability or illness when the real risk is estimated at around 25%.2

Policies offer different types of coverage, so make sure to consider carefully when it’s time to choose what kind of policy you need.


4. Trauma Insurance

Some people refer to life trauma insurance as “critical illness cover” or “recovery insurance.” It pays you a lump sum amount in case you suffer from a critical illness. 

This type of insurance will help you cover medical treatment expenses so that financial problems will not add to your burden in the event of a serious medical condition.

You can learn more about how an illness becomes critical in the insurer’s Product Disclosure Statement (PDS). Critical illness includes but is not limited to medical conditions like stroke, heart attack, head injury, and cancer. 

Note: trauma insurance typically does not cover mental health conditions.

It can be difficult to decide what type of insurance suits you, your family, assets, and your financial situation.

This is why it may be beneficial to seek help from a financial adviser in Australia in finding the right coverage for you.


You may not think about personal insurances on a day-to-day basis, but they are key in providing you and your family with financial security in unforeseen circumstances. Personal insurance can help you best prepare for the unexpected.

At Leo Wealth, we take the time to get to know you. Financial advice is not only about investing or growing your money – it’s about how you can maximise your current situation to provide security and financial wellbeing for your future.


Contact Leo Wealth today!



  1. https://www.savvy.com.au/1-in-3-australians-dont-buy-adequate-life-insurance-cover-why/
  2. https://www.onepathinsurance.com.au/adviser/apex-insights/insurance/insurance-how-big-is-australias-underinsurance-problem.html