We plan for holidays, home renovations, and retirement but we’re less likely to plan for the unexpected. Life insurance is one quiet but powerful way to protect the people you love from financial stress if something happens to you.
Whether you’re raising a family, supporting a partner, or building a business, life insurance helps ensure that your legacy includes stability rather than uncertainty. It can be a powerful tool for your family’s financial resilience.
Life insurance is designed to provide a lump sum payment to your nominated beneficiaries when you die or, in some cases, are diagnosed with a terminal illness. The payout can help ensure that your loved ones aren’t left scrambling to cover costs such as mortgage repayments or rent, outstanding debts, funeral costs and living expenses during an already emotional time.
It can be particularly helpful if:
- you have dependents who rely on your income
- you’re the primary breadwinner or contribute significantly to household finances
- you have joint debts with a partner
- you want to leave a legacy or charitable gift
- you’re a business owner
Even if you’re young and healthy, life insurance can be affordable and locking in a policy early may mean lower premiums over time.
How much life insurance do you need?
There’s no one-size-fits-all answer, but a good starting point is to ask yourself: “If I were gone tomorrow, what financial gaps would my family face?”
Here’s a simple framework to help you estimate your coverage needs:
1. Calculate your financial obligations
Start by listing the major expenses your loved ones would need to cover:
- Mortgage or rent: how much is left to pay?
- Living costs: groceries, utilities, transport, childcare
- Children’s education: school fees, uniforms, university costs
- Debts: credit cards, car loans, personal loans
- Funeral and legal costs: can be around $10,000–$20,000i
Add these up to get a baseline figure.
2. Consider your income
How long your family would need financial support. Multiply your annual income by the number of years you’d want to replace it, for example, five to 10 years.
If you earn $100,000 and want to provide seven years of income, that’s $700,000.
3. Factor existing assets
Do you have savings, superannuation, or investments that could help cover costs? Subtract these from your total needs to avoid over-insuring.
4. Account for inflation and future needs
Costs rise over time, and your children’s needs will evolve. It’s wise to build in a buffer of say, 10-20 per cent to future-proof your coverage.
5. Review regularly
Your life changes, and so should your insurance. Marriage, children, mortgages and career shifts can all affect how much cover you need. We can help with a regular review to ensure your policy stays aligned with your goals.
Different types of life insurance
There are a few key types of cover to be aware of:
- Term life insurance pays a lump sum if you die or are diagnosed with a terminal illness.
- TPD (Total and Permanent Disability) covers you if you’re permanently unable to work due to illness or injury.
- Trauma insurance pays a lump sum if you’re diagnosed with a serious illness like cancer or stroke.
- Income protection replaces a portion of your income if you’re temporarily unable to work.
Life insurance in super
For many Australians, life insurance is already tucked away inside their superannuation fund. Most super funds automatically include a basic level of life cover and TPD insurance, and some also offer income protection.ii
Premiums are typically lower than retail policies and are deducted from your super balance. In many cases, you won’t need to complete a health check to get default cover, and the premiums may be more tax-effective depending on your circumstances.
While insurance in super is convenient, it’s not always comprehensive and it’s not guaranteed to suit your needs in the long term.
If you’re relying on insurance through super, it’s a good idea to review your fund’s policy and consider whether it’s enough, especially if your circumstances have changed.
If you’re unsure where to start, we’re here to guide you through the options, crunch the numbers, and make sure your policy reflects your values and responsibilities.
Our experienced team are here to help you with your next steps. Reach out to us here.
