Myth busting life insurance
Some of the strange things some people believe, about Life Insurance.
Most people wouldn't decide to insure half the value of their new car, so why do many Australians only have half the life insurance cover they need?
There are a number of reasons - people think they already have enough, they believe they don't need insurance or they think that it's too expensive. But many of these reasons are more myth than reality.
Let's face the facts and debunk some myths.
The real issue is not that you can't afford it - the issue is that you don't think it can happen to you
Myth 1 - I have enough insurance inside my super
Unlikely. Remember the minimum level of cover provided via your super fund is automatically set with all members in mind so it's unlikely to be exactly the level of cover you and your family really need. More likely than not, it wouldn't cover all or even most of your debts.
Make sure you contact your super fund to find out your level of cover and then speak with us for a comparison.
Myth 2 - I don't need insurance, the Government will always look after me if I get sick or injured
This would be nice but it's not really the case. Centrelink currently pays a maximum disability pension of $797.90 per fortnight for singles and $601.50 for couples. Would this cover your current lifestyle? This equates to less than $43 a day for a couple.
You can see those numbers for yourself here.
Myth 3 - Workers Compensation will cover me
Not usually. Workers' compensation only covers accidents or injuries that occur during working hours or for an illness that's the direct result of your employment.
The majority of accidents and illnesses occur outside the workplace. So if you want to protect your lifestyle and your family it's unwise to rely on workers' compensation alone.
Myth 4 - Life Insurance is not affordable
For most Australians, insurance is very affordable. For example, a 35 year old male, non-smoker applying for $500,000 of Life Insurance cover the monthly premium would be approximately $40. A 35 year old female, non-smoker applying for $500,000 of Life Insurance cover the monthly premium would be approximately $35.
That's peace of mind for less than the cost of a coffee a day. If you have some existing cover, increasing this to adequate levels may cost you even less than that coffee. Depending on your circumstances, you may be able to have your Income Protection insurance premiums paid from your employer's superannuation fund at a lower tax rate than your current income tax rate.
Myth 5 - Life Insurance companies do not pay claims
Simply not true. Insurers do pay claims. In fact, Life Insurance companies pay out almost $13 million every working day in claims to customers2. This figure would be even higher if the Australians had adequate levels of cover.
Sapience clients have received in excess of $5,000,000 in claim payments.
Myth 7 - Most people have enough insurance
Unfortunately, this is not the case. In fact, research shows that 60% of families with dependent children do not have enough insurance to cover the household expenses for a year if the family breadwinner were to die4. We also know that on average those that have death cover through their super policy have less than half the level of cover they need5.
Resources
1 Centrelink website.
2 IFSA analysis based on APRA data and Risk Store data 2007
3 IFSA, industry underwriting analysis 2007
4 IFSA/TNS Protection Gap research 2005
5 IFF/AIST Research, 2008
Ironically, most Australians insure their homes and cars (even their smartphones) but less than a third insure their most valuable asset - their ability to actually earn an income. This causes unnecessary hardship for numerous Australians and often financial disaster to unsuspecting families.
If you have used one of these crazy excuses to avoid getting your Life Insurance or Income Protection sorted, just give us a call and ask for a quote to start the conversation.
Frequently Asked Questions: Busting Life Insurance Myths
Will the Government really look after me if I'm disabled?
Relying on the Disability Support Pension (DSP) is a gamble with "clinical poverty." In April 2026, the maximum partnered rate is $905.20 each per fortnight. The daily reality for a couple is calculated as:
$$Daily\ Rate_{Couple} = \frac{\$1,810.40}{14} \approx \$129.31$$
If your mortgage, utilities, and grocery bills exceed $65 per person per day, the DSP will leave you with a Protection Gap that could lead to the forced sale of your home. A Sovereign plan ensures your lifestyle is not dictated by the government's minimum safety net.
Do insurance companies actually pay out claims in 2026?
This is a "Black and White" fact: they do. In 2026, Australian life insurers pay out approximately $40 million every working day in claims. According to the latest APRA data, the acceptance rate for death claims remains exceptionally high at 97.2%. The myth that "they don't pay" is usually an excuse for non-action, rather than a reflection of institutional behavior.
Is Workers' Compensation a valid backup plan?
Only if you plan on being injured exclusively between 9:00 AM and 5:00 PM. Statistically, the majority of disabling accidents and illnesses (including cancer, heart disease, and mental health issues) occur outside of workplace hours. Workers' Comp provides zero protection for the 16 hours of your day spent at home or pursuing the hobbies you love. You need a policy that follows the person, not the timesheet.
Is Life Insurance truly affordable for a standard professional?
In the 2026 market, $500,000 of Life Insurance for a 35-year-old non-smoker costs roughly $29–$39 per month on average. For less than the cost of a standard $5.50 Flat White a day, you can fund a multi-million dollar liquidity event for your estate. The cost of not having cover is mathematically infinite for the family left behind.
[Image comparing the cost of daily coffee vs a life insurance premium]Why is my Superannuation insurance likely insufficient?
Super insurance is a "one-size-fits-all" institutional product. It is often calculated on a Base Salary only and does not account for your specific debt levels, children's future education, or spouse's income needs. Furthermore, as the Super Guarantee (SG) reached 12% in 2025, many funds have increased their insurance costs, potentially eroding your retirement compounding while still leaving you underinsured.
Disclaimer: Life insurance premiums and Centrelink DSP eligibility are subject to indexation and personal underwriting. In 2026, managing your human capital requires a clinical strategy. For an absolute audit of your current "Myths vs Reality," we recommend a confidential consultation.
Call us today on 1300 137 403 or email us here for a no-obligation private chat about your situation.
Drew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses. He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn. Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.
