How much life insurance do you actually need?

There is no single right number. The common approach, and the one this calculator uses, is a needs analysis: add up what the money would have to do (clear the mortgage and other debts, pay for the funeral, educate the children, cover the shortfall in what the household runs on for a set number of years), then subtract what your family already has to do it with (superannuation, savings, investments, anything they could sell). The gap is the indicative amount. Two households on the same income can land on very different numbers depending on their debts and how long they would need support.

A multiple of salary is a rule of thumb, not a calculation. It is popular because it is quick, but it ignores everything that actually drives the number: what you owe, how many years your household would need support, what your family already holds in superannuation and savings, and whether anyone else is earning. Two people on the same salary can need very different amounts. Working from your own debts, costs and assets, as this calculator does, gets you closer than any multiple will.

We cannot give you a price here, because premiums are individually assessed and quoting one would be advice rather than general information. What we can tell you is what moves the number: your age, whether you smoke or vape, your occupation, your health and family history, how much you apply for, whether the policy is held inside or outside superannuation, and whether the premium is stepped (rising as you get older) or level. Two people applying for the same amount can be quoted very differently. A licensed adviser can get you real figures from several insurers.

Yes, if you tell us about it. The calculator asks what you already hold, inside and outside superannuation, and subtracts it, so the figure you get is the additional amount rather than the gross. Do check your statement rather than assuming: since the Protecting Your Super reforms, insurance is switched off on accounts left without a contribution for 16 months, and it does not start automatically for members under 25 or with a balance under $6,000 unless they opted in. It is also worth checking whether what you hold does what you think it does.

Costs that are paid over many years, such as school fees and household living costs, are not simply multiplied out. Each future year is increased for inflation and then discounted back to what it is worth today, because a lump sum paid now would earn a return while it is being drawn down. School fees are counted from age five rather than from birth. Living costs are sized on the shortfall, so whatever would still come in without you is taken off first. The defaults are 2.5 per cent inflation and a 3 per cent return, and you can change both on the results screen to see how sensitive your number is.

This calculator gives general information and an indicative estimate based on what you enter and the assumptions shown. It is not a recommendation and it is not personal advice. It does not take into account your objectives, financial situation or needs, and it makes no recommendation about any product, insurer, ownership structure or amount. It is a starting point for a conversation with a licensed adviser, who can look at your full situation, the policy wording, and how anything you take out should be structured and owned.

This calculator sizes life insurance only. Total and permanent disability, trauma and income protection are sized in different ways, because the money has a different job: replacing an income for years, funding medical treatment and recovery, or adapting a home. If you are working out life insurance it is worth reviewing those at the same time, since the household would be relying on the same budget.

Choose whichever reflects what would actually happen. If your family would stay in the home, the money needs to clear the loan so they can. If they would sell instead, the loan is paid out of the sale, and whatever equity is left over is treated as money they can use. If the sale would not raise enough to clear the loan, the shortfall stays in your total, because that debt does not disappear. Remember that a family who sells still needs somewhere to live, so include rent in your living costs.