The 4 types of life insurance: what they are and when you need them
ProtectionArticle8 April 2025
Life insurance isn’t just about taking care of your family if you pass away. The right cover can also help if you become disabled, have an accident, or get seriously ill. Here’s a quick guide to the four main types of life insurance.
Life Cover
Life cover helps you and your loved ones financially in the event of your death or a terminal illness diagnosis. This is crucial especially if you have people who depend on you, a mortgage or other debts. You may have a limited amount in of Life cover through your superannuation. To ensure you have enough to cover your needs, you can purchase life cover through your financial adviser, or directly through insurance providers such as our Ezicover product.
Life Cover: How much cover do you need?
The Australian Securities and Investments Commission (ASIC) has a life insurance calculator that can help you work out the right level of cover for you and your loved ones. For a more accurate amount, speak to your financial adviser. They’ll work with you to understand your current situation and future goals to make sure your cover suits your needs.
Life Cover: How is your policy paid out?
A life cover benefit usually goes to the policy owner or a nominated beneficiary like your spouse or children.
Life Cover: How is your policy structured?
You can buy life cover on its own or ‘link’ it to other cover types like total and permanent disability (TPD) or trauma cover. Linking can reduce premiums but might affect your benefit amount if you claim on one type of cover. This is because if you’re paid out for one linked cover like TPD, it will reduce the benefit you’ll receive from your life cover by the equivalent amount. You might be able to buy back the reduced life cover later.
Total and permanent disability (TPD) Cover
Becoming unexpectedly disabled is not only a huge mental shock – it can be financially challenging as well. You’ll need to consider the costs of medical care and perhaps modifications to your home. You could also have a significant earnings gap over your working lifetime. That’s why total and permanent disability (TPD) cover can be so valuable. You may have a limited amount of TPD coverage through your superannuation. To ensure you have enough to cover your needs, additional TPD cover can only be purchased through a financial adviser.
TPD: What are the different types of TPD?
When it comes to TPD cover, there are a few different types to consider, each catering to specific needs and circumstances.
Own Occupation TPD
If you're working a minimum of 16 hours per week in a specific occupation, this Own Occupation TPD might be for you. It covers you if you become unable to ever perform your own occupation again.
Any Occupation TPD
If you're employed for at least 16 hours per week. It provides coverage if you become unable to ever perform any suited occupation again.
Domestic Duties TPD
If your primary role is maintaining the family home, this cover might suit you. It protects you if you're unable to perform domestic duties or any suited occupation ever again.
Modified TPD
This definition is inclusive and available to everyone eligible for TPD cover. It covers you if you're unable to look after yourself ever again due to the loss of limbs, sight, or intellectual capacity.To ensure you have enough to cover your needs, speak to your financial adviser about TPD cover today.
TPD: What happens when you make a claim?
You’ll choose a definition: ‘own occupation’ or ‘any occupation'. This is a decision best discussed with your financial adviser.
‘Own occupation’ means your insurer assesses your claim based on your ability to perform the specific requirements of the job you currently do.
‘Any occupation’ means your insurer checks if you can perform any job you are qualified or suited to, based on your education, training or experience.
It’s worth noting that TPD claims can take longer to pay out than other types of life insurance because of the complexities involved with determining whether a disability is permanent. Speak to your financial adviser about TPD cover today.
TPD: How is your policy structured?
You can buy TPD cover on its own or ‘link’ it to life cover, trauma cover, or both.
Income protection cover
Income protection helps you safeguard one of your biggest assets – your ability to earn an income. It helps support you if you become injured or ill and are unable to work, with a regular benefit in place of the salary you’d normally be earning.
How much cover do you need?
When you apply for income protection, you can choose a sum insured worth up to 70% of your before-tax income (excluding super contributions). We recommend speaking to your financial adviser to work out exactly how much you’ll need to maintain your lifestyle and cover any debts or bills.
How is your policy paid out?
With income protection, you have a waiting period and a benefit period that determine when and for how long your policy will pay benefits.
The waiting period is the amount of time you’ll need to wait after consulting a doctor about an injury or illness before getting your first benefit payment. You can choose from 30 days, 60 days, 90 days, 1 year or 2 years, depending on your emergency savings and any other cover held, for example in your superannuation fund. You might want to factor in any annual or sick leave from your employer when making your decision about the waiting period.
The benefit period is how long you’ll receive regular payments for while you’re eligible to claim. This might be based on a length of time (for example, two years) or an age (for example, until you are 65). Whatever you choose will affect your premium payments, so it’s a good idea to consult your financial adviser.
Trauma Cover
Trauma cover supports you while you recover from a serious medical condition. It helps you pay for treatment, make any lifestyle changes, and take care of everyday expenses. Trauma cover can only be purchased through a financial adviser.
Trauma Cover: What are you covered for?
Trauma cover includes serious illnesses that need expensive medical treatment, have a significant recovery period, or force you to make big lifestyle changes. This may include serious conditions such as a heart attack and stroke. You should read the relevant Product Disclosure Statement (PDS) to see a list of everything you’re covered for.
Trauma Cover: How is your policy structured?
You can purchase trauma cover on its own or ‘link’ it to life cover, total and permanent disability cover, or both.
Trauma Cover: How many times can you make a claim?
A little-known benefit of trauma cover is that you may be able to make multiple claims in your lifetime. That’s because there’s an option to reinstate your policy, usually after 12 months of claiming. Just remember, it’s unlikely you’ll be able to claim for the same or related condition twice. There are also partial benefits which pay a lower amount for a shorter list of less-severe conditions. To find out if trauma cover is right for you, speak to your financial adviser.
There are two ways you can buy Zurich Life Insurance.
Choose the option that best suits you.
With a financial adviser:
A financial adviser can help you understand your current financial situation, as well as your cover in a way that gives you the best value for money and suits your cashflow and tax objectives.
Directly from us:
If you know the type and amount of cover you need, Zurich Ezicover is a range of simple life insurance products. It’s easy to apply online.
