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The life insurance industry has had a big shakeup in recent years, and it’s almost unrecognisable from the sleepy and “one product size fits all” approach of a decade ago.

People are sourcing their insurance online in increasing numbers, and traditional brokers are struggling for market share just as they have moved to a fee for service model, which has pushed up prices.

Even airlines are getting into the life insurance business. Qantas has recently inked a deal where people who buy life insurance through a Qantas partner – TAL Life – earn frequent flyer points.

At the core of the issue is the fact that the term “life insurance” doesn’t only mean insurance which is paid out in the event of a death.

The term covers a number of different type of insurance which have a different relevance to different people at different stages of their lives.

Advisers regularly tell people they should check their insurances regularly, so they have appropriate levels of cover for the right type of insurance.

To clarify the market, Life Insurance is a blanket term referring to:   

Total and Permanent Disability (TPD) Cover. This is a lump sum payment if the policyholder suffers a disability.

Trauma Cover. Lump sum payments if the policy holder suffers a disability or a terminal or debilitating illness.

Income Protection. This delivers benefits of 75 percent of the policy holders income if they are unable to work because of illness or injury.

Life Insurance. The traditional product which pays a lump sum to nominated beneficiaries in the event of death or terminal illness.

Funeral Insurance. It is what it sounds like. Its pre-paying for your funeral so your family doesn’t have to pay for it.

Which one is best for you depends on your stage of life.

Younger people, without dependents, are less likely to need life insurance or trauma cover, and will find income protection insurance more relevant.

Income protection insurance will be less important to retirees, but they will be more focussed on live cover, trauma insurance and even funeral cover.

Here’s a quick guide to life insurance needs through different life stages:

 

Age RangeCharacteristics• Insurance Priorities
18 - 25• Starting work

• No dependents

• No mortgage
• Income Protection
25 - 35• Children are born

• Mortgages are taken out

• Income increases
• Life Insurance

• Income Protection

• Trauma Cover
35 - 45• Income increasing

• Mortgage decreasing

• Saving for retirement
• Life Insurance

• Income Protection

• Trauma Cover (greater need)
45 - 55• Trajectory towards retirement

• Children are older, becoming independent

• Long term debt level decreasing
• Life Insurance, Income Protection and Trauma Cover are less important

• TPD can be more relevant
55 - 65• Wealth has been accumulated

• Children are independent

• Retirement is close
• TPD Cover could now be as important as Life Insurance, Income Protection and Trauma Cover.

• Many people also take out funeral cover at this life stage.