How to Compare Life Insurance Policies | Whole Life Insurance

How to Compare Life Insurance Policies

The task of finding an acceptable life insurance policy can seem overwhelming.  Before you can even compare life insurance policies, it is helpful to understand the terminology.  Here is a list of terms to get you started...

Term Life Insurance

A term life insurance policy pays out a death benefit only if the person covered dies during the specified term.  For example, if you take out a term life insurance policy you might take it out for ten years, or it might be dependent upon the insured individual becoming a certain age.  Either way, term life tends to be less expensive than whole life insurance.  However, it becomes more expensive when the individual ages or when the individual partakes in risk-taking behaviors.  You cannot cash out a term life policy; instead, the policy pays a lump sum to any dependents upon death.

Whole Life Insurance

A whole life insurance policy does just what it sounds like – it covers the insured person for the duration of their lifetime.  Whole life insurance tends to be more expensive.  It also has a “surrender value.”  A surrender value is the cash value of the policy – the insured can use it in order to pay lower premiums later in life.  Whole life insurance is the insurance plus an investment component.

Surrender Charges

The surrender charge is the amount of money an insurance company will charge if you cancel your policy.

Product Disclosure Statement (PDS)

This statement describes the life insurance policy.  It will let you know what the benefits are, what the limitations are, and what the costs and fees for the product are.


APRA, or the Australian Prudential Regulation Authority, is the supervisory body for life insurance companies that have been registered under the Life Insurance Act of 1995.

You can look up more terms you will run into during your comparisons at our Life Insurance Glossary.

Before Comparison Shopping

Before you compare the different life insurance policies, you should first determine whether you want whole life insurance or term life insurance.  Once you have made this decision, you should then check to ensure the companies you are comparing have registered under the Life Act.

What to Look For

Naturally, the first thing you are going to compare will be the policy rate.  Don’t let a low rate be your only deciding factor.  You want to make sure you will have enough of a benefit to cover your family’s living expenses in case of your death.  A good general guideline is a policy that covers five to ten times your annual salary.  Does that sound like a lot?  It should be – especially if your family is dependent upon your income.

If you are choosing term life, you will want to look for a good balance between your premiums (monthly payments) and your death benefit.  In addition, you will want to find out how long the insurance will cover you for.  What might sound like a good deal may quickly sour if you find that the term covered is only five years.

If, on the other hand, you are choosing a whole life policy, you will want to compare the premium, the benefit, and the age the policy matures.  You will also want to do your homework.  Before signing any underwritten documents, you should Google the company to make sure that there are no complaints against it.

Finally, in either case, you want to find out what is covered and what is not covered.  Most policies will not cover suicide (so, get that get-rich quick idea out of your head now).  Some will cover death after a long illness, but some will only cover accidental death.  Make sure you understand what you are getting into before you sign the contract.