Insurance Needs Analysis
How much Life, TPD and Trauma cover do you each actually need — and what income protection benefit should you target? This tool capitalises your family’s future needs the way professional planning software does: it values your ongoing living costs and your partner’s continuing income over your life expectancy in today’s dollars, then compares the result with the cover you already hold.
Your cover
You
Your partner
You
Your partner
Assumptions & method (how the numbers are built)
- Present-value method. Ongoing amounts are capitalised as the present value of an inflation-indexed annual amount over the funding period, discounted at the real (net) rate r = (1 + return) ÷ (1 + inflation) − 1: PV = X × (1 − (1 + r)−N) ÷ r (or X × N when the return equals inflation). This is consistent with professional planning-software assumptions, where insurance proceeds are assumed to be invested and drawn down over the funding period. In the year-by-year funding tables, indexed amounts are drawn at the end of each year — the same timing the formula assumes, so the two reconcile to the dollar.
- Funding period. Defaults to the beneficiary's life expectancy, rounded to the nearest whole year — for a couple, the surviving partner's; for a single person, your own life expectancy is used as a proxy for your estate and dependants. Life expectancy comes from the Australian Life Tables 2020–22 (Australian Government Actuary); ages under 31 use the age-31 row. You can edit the number of years.
- Investment return default: 4.2% p.a. — a conservative beneficiary investment profile, consistent with professional planning-software assumptions (a surviving partner typically invests defensively). Editable.
- Indexation. The ongoing need and continuing income are indexed at your inflation assumption (default 2.5% p.a.). Professional planning software often defaults indexation of costs to 0%; indexing the need is the more conservative choice — it produces a higher recommended cover.
- Ongoing need default. 75% of gross household income — a common planning convention for maintaining the household's standard of living. Fully editable.
- Home duties & childcare. The replacement cost you enter for a person's unpaid care and household work is added to the ongoing need for their Life and TPD calculations — so cover for a non-earning parent is properly costed, not ignored.
- Continuing income offset. The surviving/continuing partner's income is valued as a present value over the same funding period and counted as capital available — so you only insure the true gap. For trauma it is offset over the recovery window.
- Trauma convention. Trauma cover is sized as a recovery bridge — the ongoing need for the recovery years you set (default 2, undiscounted) plus the medical/recovery allowance and any buffer — not lifetime capital, so no year-by-year funding table is shown for it.
- Offsets. Super is counted as capital available for Life and TPD only (it is generally not accessible on a trauma event). Liquid/disposable assets and continuing income offset all three lump-sum covers.
- Gross up for super tax: not applied. Tax on TPD or death benefits paid through super (and any need to gross up cover held in super) is not modelled — consistent with professional planning-software defaults; we confirm ownership structure and tax with your adviser.
- Income protection. Target benefit is 70% of gross income, shown monthly — the maximum new policies pay after the first six months of a claim under the rules that took effect in October 2021 (up to 90% applies for the first six months). Benefits are based on your income at the time of claim; insurers apply lower percentages to higher incomes and monthly caps, so the exact insurable amount is confirmed at quote stage.
- Education. The per-child allowance is a simple (undiscounted) total added to Life and TPD needs and cleared at claim.
- The estimate is produced by a fixed calculation from a limited set of inputs. It is not a recommendation that any amount of insurance is suitable or sufficient for you, and the estimated amounts may not be available to you as cover — age, occupation, underwriting and insurer caps apply. All figures are in today's dollars; premium affordability, policy definitions and ownership (super vs personal) are not modelled.
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Cover amounts are only half the story — ownership (super vs personal), premium structure and policy definitions matter just as much.
Book a chat with usHow much life, TPD and trauma cover do you actually need?
There is no shortage of rules of thumb. Ten times your income, twelve times, twenty. They are easy to remember and they are almost always wrong, because they take no account of what you owe, what your family would actually spend, or what you already have.
This calculator works the other way around. It adds up what your household would genuinely need if something happened to you, then subtracts what is already there. What is left is the gap, and the gap is the number worth insuring.
What goes into the need
Clearing debt is usually the largest single piece: the mortgage, investment loans, car and personal debt, credit cards. On top of that sits the income your household would have to replace, for however many years you choose, plus an allowance for each child's education, funeral and final expenses, and an emergency buffer. If one partner does most of the home duties and childcare, replacing that work has a real cost, and the calculator lets you put a figure on it.
What comes off
Super balances and liquid assets reduce the need, and so does a partner's continuing income. This is the step the rules of thumb skip, and it is often the difference between a number you can afford and one you cannot.
The four covers do different jobs
Life cover pays a lump sum on death. TPD pays if you are permanently unable to work again, and usually has to cover home modifications and ongoing care as well as the debt and the lost income. Trauma pays a lump sum on diagnosis of a specified condition, such as a heart attack, a stroke or many cancers, and is generally sized over a shorter horizon, because it exists to buy you time and cover the medical gap rather than to replace a lifetime of earnings. Income protection is different again: it pays a monthly benefit while you are unable to work, and most policies cover up to about 70% of your income.
What this does not do
It does not price a policy, and it cannot tell you whether you would be accepted for cover. That depends on your health, occupation and pastimes, and it is settled at underwriting, not here. It does not know what cover you already hold inside your super, which is often more than people expect and occasionally far less. And it does not weigh up whether cover is better held inside or outside super, which changes the cost, the tax treatment and who is able to receive the money.
Treat the result as the starting point for a conversation rather than a recommendation. Insurance is one of the few areas where the right answer is genuinely personal.
Common questions about insurance needs
How much life insurance do I need?
Enough to clear your debts, replace your income for as long as your household would need it, cover your children's education and final expenses, and leave a buffer, less whatever your super and liquid assets already provide and whatever a partner would keep earning. That subtraction is why a needs-based figure is usually very different from a multiple of your salary.
What is the difference between TPD and trauma cover?
TPD pays if illness or injury means you are permanently unable to work again, so it is sized like life cover with home modification and care costs added. Trauma pays a lump sum when you are diagnosed with a specified condition, whether or not you stop working, and is usually sized over a few years to cover the medical gap and the lost income while you recover.
Do I already have insurance through my super?
Most people have some. Default cover inside super commonly includes life and TPD, and sometimes income protection. It is worth checking the amount on your annual statement before you buy anything, because default cover is frequently well below a needs-based figure, and occasionally it is more than you need and quietly eroding your balance.
How much income protection can I get?
Most policies will cover up to about 70% of your income, paid monthly while you are unable to work. The benefit period and the waiting period matter as much as the amount: a policy that pays for two years is a very different product from one that pays to age 65, and the price reflects that.
Can I hold trauma cover inside super?
Generally no. Since 1 July 2014, superannuation trustees have been prohibited from providing insured benefits that do not line up with a condition of release, and trauma is not one of them. Cover held by someone who joined the fund and was already insured before that date can continue, but new trauma cover is held outside super.
Is it better to hold insurance inside or outside super?
It depends on cash flow and on who you want the money to reach. Premiums paid from super do not come out of your take-home pay, which makes cover more affordable, but a benefit paid from super has to satisfy a condition of release and may be taxed depending on who receives it. Cover held personally costs you cash but is simpler to direct. It is worth deciding deliberately rather than by default.