When life insurance is worth it (and when it may not be)

It’s an important question: Would anyone be financially worse off if you died? For many people who answer “yes”, life insurance is commonly something to consider. For those who answer “no”, a small amount of cover may be the most appropriate, depending on individual circumstances.

When life insurance usually makes sense

Life insurance is most valuable when other people rely on you financially. Or when they would inherit your obligations if you can no longer meet them yourself.

People are more likely to need cover if they:

• Have a partner or dependants who rely on their income - like children, a spouse, or ageing parents
• Have a mortgage or other debts someone else would need to repay, refinance, or service
• Are a main income earner, or their income is essential to the household budget
• Want to fund future costs like school fees, childcare, or ongoing living expenses
• Run a business - especially if they have business loans or they’re vital for generating revenue.

In practical terms, life insurance is designed to create financial breathing room. Time for a surviving partner or loved one to grieve and reorganise. Time to avoid forced decisions like selling a home quickly, and money to keep everyday life stable.

How much cover is “enough”?

Many people use a basic rule of thumb: “I added up my debts then subtracted what I’d receive. The difference is my cover amount.”¹ That’s not a universal formula, but it’s a helpful starting point for thinking about the scale required to replace your income and protect any long-term plans.

You can also try the Australian Government’s Moneysmart insurance calculator. Answer a few simple questions about your life and financial situation and it will calculate if you need cover and suggest an amount. Or, for a detailed analysis of your current and future needs, talk to a financial adviser.

When the need for insurance may be small

Your personal situation will always affect the level of cover you need. For example, someone may only need a small amount of cover if:

• They’re single with no dependants
• They have no meaningful debt
• They have substantial savings or assets to cover expenses and support anyone who relies on them
• They’re older and financially independent, with self-sufficient dependants.

In those cases, the biggest costs are often limited to funeral and final expenses, which many people can cover through savings.

The Australian context: super and tax

In Australia, many people hold life insurance through their superannuation - sometimes automatically. This can be convenient and tax-effective, but it comes with a key caution: Default cover amounts may not be enough to repay a mortgage and replace income for a family. It’s also important to remember premiums paid inside super can reduce retirement balances over time. So, it is generally worth checking whether the level of cover and the premiums paid are appropriate.

From a tax law perspective, payouts to certain dependants are generally treated more favourably, while payouts to non-dependants may be taxed – e.g. to adult children. This is one reason beneficiary nominations and ownership structures matter.

Don’t overlook TPD and income protection

Life insurance in Australia is often bundled with:

• Total & Permanent Disability (TPD) which pays if the insured is permanently disabled and unlikely to work again
• Income protection which replaces part of the insured’s income if they’re temporarily unable to work due to illness or injury

For many working Australians, income protection can be even more relevant than life cover. That’s because temporary incapacity is statistically more likely during working years than death.² The right mix depends on your income, debts, and who depends on you.

A quick self-test

Ask yourself: If I died tomorrow, would my family be able to:

• Keep up with mortgage/rent or pay it out?
• Cover living expenses for the next 6-24 months?
• Pay for childcare and schooling?
• Repay debts and cover funeral costs?
• Keep the business stable if I’m key to operations?

If you answered “no” or “not sure”, then life insurance could be worth considering.

Who should you choose?

Australians have lots of choice when it comes to insurance companies. However, by choosing a leading company like Zurich you get:

• Strength in numbers: Over 1.5 million Australians and over 75 million people³ worldwide trust the Zurich Group to protect them. That’s in 200+ countries and territories.
• Confidence in claiming: In 2025, more than $1.3 billion was paid⁴ to Australian families and households by Zurich and OnePath Life.
• Care in rehabilitation: In 2025, 76% of customers⁴ who used our rehabilitation services returned to work.

So, you can rest assured, we’ll be there when you need us.

1. Australian Government Moneysmart: moneysmart.gov.au/how-life-insurance-works/life-cover
2. Fair Work Australia Key Work Health and Safety Statistics Australia 2025
3. Zurich media release 6 November 2025.
4. Zurich Australia Limited – retail life claims paid 2025, Zurich Australia Limited claims report 2025

This article has been prepared by Zurich Australia Limited ABN 92 000 010 195, AFSL 232510. This information is current as at 11 August 2026 and may be subject to change. This information does not take into account your personal objectives, financial situation or needs. You should consider these factors and the appropriateness of the information to you. Consider seeking advice specific to your individual circumstances from an appropriate professional. You should also consider the Product Disclosure Statement (PDS) for the product and any applicable Target Market Determination (TMD) available zurich.com.au/life-insurance/documents or by calling 1800 394 268 in deciding whether to acquire or to continue to hold the product.