What does life insurance cover?

There is a common misconception that life insurance only refers to protection when a loved one passes away or is diagnosed with a terminal illness. While “life insurance” can refer to term life insurance in the event of death or terminal illness, it is also used broadly to describe a category of products designed to help protect you and your family. These include Critical Illness (Trauma) Insurance and Total and Permanent Disability Insurance.

In this article we look at the security that the different types of life insurance can offer by examining the five most common reasons for making a claim in 2022-2023*.

1. Mental Health

The past few years have been uniquely challenging for many, with rates of anxiety and depression increasing globally by 25% due to the Covid-19 pandemic. TAL offers income protection insurance that covers mental health conditions such as Post Traumatic Stress Disorder, depression and severe anxiety.

Of all claims paid out by TAL in 2022, 19% were for mental health. The bulk of these claims (68%) were under income protection insurance, which pays out a regular income that helps you keep up with living expenses if you are unable to work due to injury or illness.

2. Cancer

Cancer is one of the biggest health concerns for Australians. According to the Cancer Council, at current rates, one in two Australians are expected to be diagnosed with cancer by the age of 85.

As a consequence, cancer accounted for 17% of the $3.5 billion in claims we paid out in 2022. But it’s heartening to see advances in medical technology helping more and more people to survive their cancer diagnosis, with less than half of our cancer claims being paid due to a death. 42% of claims were for income protection, and another 4% were for TPD insurance, where the claimant receives a lump sum after becoming totally and permanently disabled.

3. Musculoskeletal and Connective Tissue Diseases

This category includes claims made due to back pain—an issue that the Australian Institute of Health and Wellness estimates affects one in six people nationally. Sciatica is considered a common health condition related to back pain, with other musculoskeletal and connective tissue diseases including rheumatoid arthritis, fibromyalgia, muscular dystrophy and lupus. If you are experiencing back pain, read our article on the cover available.

11% of claims paid by TAL in 2022 were for musculoskeletal or connective tissue conditions, with 69% of those claiming under income protection and 30% for TPD.

4. Injuries and Fractures

Under this category, you’ll commonly find joint dislocation and bone fractures. In 2022 these types of injuries comprised 16% of the total claims paid out by TAL. While a small number of these claims unfortunately came after the death of a customer (10%), most were for income protection (72%). 18% of claims TAL paid for injuries and fractures in 2022 were for TPD.

5. Diseases of the circulatory system

10% of the claims that TAL paid out in 2022 were due to heart issues including cardiovascular disease, heart attack and stroke. Cardiovascular disease is one of Australia's largest health problems according to the Heart Foundation, and heart disease is the single leading cause of death in Australia.

Unfortunately, 56% of the 2022 payouts relating to diseases of the circulatory system were life insurance benefits relating to people who died, with 32% of claims in this category relating to income protection. Looking at the total volume of life insurance claims paid in 2022, 72% helped our customers to continue living their lives while recovering from an illness or injury. Insurance does not just pay families when a loved one passes away but can help you keep living the life you love.

What life insurance does not cover

There are a number conditions or causes of death that may be specifically excluded from life insurance policies. Typical examples include death which occurs overseas in countries listed as ‘do not travel’ by the Australian Government. Life insurance cover can also lapse if you do not keep up to date with your premium payments. Read more on why life insurance may not pay out and be sure to check the Product Disclosure Statement (PDS) and policy schedule for your specific policy. The PDS and policy schedule will set any situations where cover is excluded or limited so it is important you check before making any decisions.

Critical illness benefit

In 2022, 7% of cancer and 4% of circulatory condition claims were made as critical illness claims. Critical illness benefits provide a lump sum payout if you become critically ill or need extensive medical treatment. You usually need to meet the requirements of the specified serious events listed in the PDS. It is often an optional extra when you buy life insurance. TAL’s critical illness benefit offers a payment of up to $2 million. Your cover amount will vary depending on the policy you select and your personal circumstances.

You can find out more about the claims made in 2022 in the infographic.

You can find out more about how life insurance works and design a level of cover that suits you by using the TAL Coverbuilder.

Important information

*Claims statistics based on total claims paid under TAL Life Limited and TAL Life Insurance Services Limited insurance products (including funeral insurance) between 1 April 2022 and 31 March 2023.

Any financial product advice is general in nature only and does not take into account any person’s objectives, financial situation or needs. Before acting on it, the appropriateness of the advice for any person should be considered, having regard to those factors. Persons deciding whether to acquire or continue to hold life insurance issued by TAL should consider the relevant Product Disclosure Statement (PDS). The Target Market Determination (TMD) for the product (where applicable) is also available. Life insurance issued by TAL Life Limited ABN 70 050 109 450 AFSL 237848.