Life insurance explained: what you need to know


Life insurance explained: what you need to know

Published August 2023 | 6 min read
Words by Carolyn Tate

Life insurance provides help after an accident or during serious illness. Here’s how it works.

Thinking about life insurance may not be top of mind for everyone, especially when you’re young and healthy, but it’s important to consider how you will financially take care of yourself and your loved ones if certain health events were to happen that impact on your ability to provide. Having life insurance can help to reduce financial stress if they can no longer rely on your income in the short or long term.

Life insurance, just like health insurance, is about being prepared for whatever may happen with your health or unexpected incidents in the future. Accidents can happen and illness doesn’t discriminate, which is why it’s important to get regular health checks to pick up any issues early on. While health insurance covers many things, there are circumstances where it doesn’t cover the costs of recovery or loss of your income.

What is life insurance?

It’s a common misconception that life insurance is just about paying money to your family if you pass away. While that’s certainly part of the range of cover available, life insurance can also help provide peace of mind at other difficult times. There are different options and coverage you can apply for, including:

  • HCF’s Life Protect Insurance is designed to help look after your family if you’re no longer able to. Your loved ones will receive a lump sum benefit of up to $1.5 million if you die or are diagnosed with a terminal illness* to help cover costs like your mortgage, school fees and day-to-day living expenses.

  • HCF’s Income Protect Insurance helps to cover living expenses and keep you afloat while you’re recovering from a sickness or injury.

  • Critical Illness Cover pays a cash benefit to help you deal with the financial impact of specific serious illnesses, like a heart attack, stroke or cancer. The amount you can claim will depend on the illness and treatment.

  • Personal Accident Insurance can help you deal with unexpected costs like transport, meals, cleaners, shopping and visits to the doctor, if you have an accident and need help getting back on your feet.

Think of life insurance as an extension of your health cover – beneficial to have at any age as an extra layer of protection if things don’t go according to plan.

What is covered by life insurance?

Life insurance cover varies depending on your provider and the type of policy you take out, so it’s always important to check the terms and conditions. For example, HCF Life Protect Insurance pays from $100,000 up to $1.5 million, depending on your age and level of cover. This payment can be made if you pass away or if you’re diagnosed with a terminal illness*.

Eligible members can also access an advance payment^ of $15,000, which can be used to help reduce the stress on your family, with immediate support for living expenses, bills or funeral costs while we assess your claim.

Life Protect Insurance also offers access to extra benefits to help you cope through the most difficult times:

  • free initial legal or tax consultation to help you prepare a will or other matters
  • contacts to help you with arranging a funeral
  • 24/7 access to free phone counselling for matters like depression, grief or elderly care
  • contacts to help you with home assistance, like cleaning, gardening and shopping, if you’re ill and unable to take care of these things yourself.

When should you take out life insurance?

You might think you’ll get around to taking out life insurance some day or that it’s something you don’t need until you’re older. But the truth is, none of us can predict what could happen in the future.

Whether you’re starting a family, making a large purchase such as buying a home or thinking about retirement, life insurance can’t stop whatever challenges life may throw at you but it can provide a level of protection so that no matter what may lie around the corner, your family is better prepared to deal with those challenges be it paying off the house or covering day-to-day costs.

How does life insurance work?

Life insurance is essentially a contract between you and your insurance provider. In exchange for your regular premium payments, your provider agrees to pay a benefit to your family, or you, for defined events including if you die or are diagnosed with a terminal illness, suffer an illness or have an accident – depending on the type of policy you take out.

Some life insurance providers may require you to undertake a medical examination, but others may simply ask you a series of questions about your health, family history and lifestyle. This is called underwriting, and for example, our Life Protect Insurance product operates in this way.

The purpose of life insurance is to reduce financial stress on you and your family during a tough time, especially if they’re dependent on you and your ability to bring in an income. Life insurance can also help to cover costs if you have an accident or suffer an illness that impacts on your ability to work or in the worst case, pass away. You’re usually free to use your life insurance payment as you wish, to help you cover costs including:

  • mortgage payments
  • bills for day-to-day living expenses
  • school or university tuition fees
  • loss of income if your partner or loved one takes time off to care for you
  • costs of healthcare and rehabilitation
  • funeral expenses.

Is life insurance worth it?

As with any insurance policy, there’s never a guarantee about when you might need to claim against your policy, and that’s where the value of life insurance can be found.

There’s so much more to life insurance than figures in a spreadsheet, because they don’t capture the value of an extra layer of protection that can help reduce financial stress for your family.

How much life insurance do you need?

If you were to pass away unexpectedly or be diagnosed with a terminal illness, what would make the difference financially for your loved ones?

When considering how much cover you’ll need, begin by listing your significant debts, like your mortgage and any loans. Reflect on your yearly income and what it covers – not only the big things, but also the day-to-day costs like groceries, kids’ schooling and routine bills. Also consider provisions for your spouse's retirement.

If you have other investments, superannuation or savings, don't forget to account for these as well. The difference between your financial obligations and your assets will give you a clearer picture of your ideal cover.

It’s also important to consider the regular cost of your life insurance premiums as part of your regular budget. Your premiums are calculated by considering various factors we ask about as part of a health and lifestyle assessment, including your age and gender, your health and your family’s medical history, lifestyle factors like drug and alcohol use, occupation duties and recreational activities.

This information is then used, along with the level of cover you’d like, to calculate your premium. Younger people who are in good health and who lead low-risk lifestyles will have lower premiums than those who are older, or those who lead riskier lifestyles. Your premiums are reassessed and calculated each year and will usually get higher as you age and become more at risk of certain health issues.

Benefits and Life Protect Insurance~

The minimum insured benefit you can apply for with Life Protect Insurance is $100,000. The maximum insured benefit you can apply for is based on your age.

  • 18 to 45: $1,500,000
  • 46 to 55: $1,000,000
  • 56 to 65: $500,000 

If you want to increase your benefit during the life of your policy, you can do this without a further health and lifestyle assessment by requesting a Life Event increase. This allows you to top up your insured benefit when certain life events occur like getting married or your child starting secondary school.

You can increase your insured benefit by up to $150,000, as long as it remains within the maximum insured benefit for your age at the time of applying. For example, if you’re aged 40 and want to increase your benefit, you can apply up to the maximum amount of $1,500,000 provided applicable terms and conditions are met#.

How to apply for Life Protect Insurance~

Ready to find out more or to apply for Life Protect Insurance? If you’re a permanent Australian resident, aged between 18 and 65, you’re eligible to apply. And if you’re an eligible HCF member+, you can save 10% on your Life Protect Insurance.

You may also be interested in Recover Cover, our unique range of life and recovery insurance products pays you within five days of getting all the information we need for the claim, so you can recover at your own pace. Get an initial quote in under three minutes or call our friendly experts on 1800 560 855.


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* Less than 24 months life expectancy. Subject to terms and conditions, exclusions, limitations and definitions. Please refer to the PDS and Policy Document for further information.

^ Payment of the advance payment does not mean your claim for the death benefit is approved. The advance payment will be subtracted from the total Insured Benefit and the balance remaining will be payable on settlement of the death claim.

# Life Event increases are subject to terms and conditions. Refer to the Life Protect PDS and Policy Document for more information.

+ To be eligible HCF Members must have HCF hospital or extras cover. Excludes Ambulance Only and Overseas Visitors Health Cover.

~ Terms and conditions apply. Please read the relevant Product Disclosure Statement, Policy Document and Financial Services Guide available by calling 1800 560 855 or visiting, and consider your financial situation, objectives, and needs before deciding on these products as any advice provided does not take these into account. In addition to these documents, you should also read the Target Market Determination (TMD) for the product, which is available at Our Recover Cover products are issued by our own HCF Life Insurance Company Pty Ltd. ABN 37 001 831 250, AFSL 236 806 (HCF Life). HCF Life is a wholly owned subsidiary of The Hospitals Contribution Fund of Australia Limited ABN 68 000 026 746, AFSL 241 414 (HCF). The premiums for Recover Cover products are paid to HCF Life. HCF receives commission from HCF Life for their sale of up to 40% of the first year’s premium plus an additional commission of 80% of HCF Life’s underwriting profit each year calculated as premiums less claims and expenses. HCF’s staff may receive an incentive depending on the annual premium of these products which they sell. This will not exceed 15% of the first year’s premium.

This communication contains information which is copyright to The Hospitals Contribution Fund of Australia Ltd (HCF). It should not be copied, disclosed or distributed without the authority of HCF. Except as required by law, HCF does not represent, warrant and/or guarantee that this communication is free from errors, virus, interception or interference. All reasonable efforts have been taken to ensure the accuracy of material contained on this website. It’s not intended that this website be comprehensive or render advice. HCF members should rely on authoritative advice they seek from qualified practitioners in the health and medical fields as the information provided on this website is general information only and may not be suitable to individual circumstances or health needs. Please check with your health professional before making any dietary, medical or other health decisions as a result of reading this website.