Whole life insurance has re-emerged as a hot topic in Australia’s personal finance landscape. While term life insurance has dominated the market for years, a growing number of Australians are asking if whole life cover can play a meaningful role in their wealth strategy—especially as insurers adapt to new economic and regulatory realities in 2025. Let’s break down what’s changed, who stands to benefit, and what to watch out for before you sign on the dotted line.
What Is Whole Life Insurance and Why Is It Back in Focus?
Whole life insurance, sometimes called ‘permanent life insurance,’ is a policy that covers you for your entire life (as long as you keep paying premiums). Unlike term life, which only pays out if you pass away during a set period, whole life guarantees a payout no matter when you die. It also includes a cash value component that grows over time—making it a hybrid between insurance and a long-term savings vehicle.
After years on the backburner, several factors are bringing whole life back into focus for Australians in 2025:
- Rising longevity: Australians are living longer, increasing demand for lifelong cover and legacy planning.
- Market volatility: With superannuation balances taking hits from market swings, some are looking to diversify with guaranteed elements like whole life.
- Regulatory changes: ASIC’s 2023–2024 reviews led to new standards for product transparency and cash value projections, making whole life policies easier to compare.
How Whole Life Insurance Works in Practice
When you buy a whole life policy in Australia, you pay regular premiums (monthly or annually). Part of this premium funds the death benefit; the rest goes into a savings component (the ‘cash value’), which grows at a rate set by the insurer—sometimes with a guaranteed minimum return.
Key features include:
- Lifetime cover: As long as you keep up premiums, your beneficiaries will receive a payout whenever you pass away.
- Cash value access: You can often borrow against or withdraw from the cash value after a certain period, providing a potential emergency fund or supplement to retirement income.
- Premiums stay level: Unlike stepped premiums in many term policies, whole life premiums typically stay the same over time.
Let’s look at a real-world scenario:
Jane, a 38-year-old small business owner in Melbourne, took out a $500,000 whole life policy in 2025. She pays a fixed premium of $280 per month. By year 10, her policy’s cash value has grown to $35,000, which she can access via a policy loan if needed. If she keeps the policy in force, her family is guaranteed a $500,000 payout, regardless of when she dies.
2025 Policy Changes and What to Watch Out For
The Australian life insurance sector has undergone significant regulatory and product shifts in 2025. Here’s what’s new:
- More transparent cash value projections: Insurers are now required to provide clearer, standardised projections for cash value growth, helping buyers make apples-to-apples comparisons.
- APRA oversight: The Australian Prudential Regulation Authority (APRA) has tightened capital requirements, meaning only well-capitalised insurers can offer whole life products—reducing risk for policyholders.
- Flexible riders: New add-ons allow policyholders to link their cover to inflation or attach living benefit riders (such as trauma or TPD) for a higher premium.
However, whole life isn’t for everyone. Consider these potential drawbacks:
- Higher premiums: Whole life costs significantly more than term cover, sometimes 6–10x higher for the same death benefit.
- Complexity: The cash value component can be confusing, with fees and surrender penalties if you cancel early.
- Limited investment upside: The savings part of a whole life policy usually grows more slowly than investing directly in shares or managed funds.
Who Should Consider Whole Life Insurance in 2025?
Whole life insurance may suit you if:
- You want to leave a guaranteed legacy for your family or favourite cause
- You have maxed out your superannuation and want another tax-advantaged savings vehicle
- You’re a business owner planning for succession or estate equalisation
- You value certainty and are willing to pay for lifelong cover
For most Australians, term life remains a more cost-effective way to protect your loved ones during your working years. But for those with complex estate planning needs or a desire for fixed, lifelong cover, whole life insurance deserves a closer look in 2025.
