🛡️Life Insurance Calculator

Life Insurance inside Superannuation

Many Australians have default life insurance through their Super fund. While convenient, the coverage is often too low for a typical family with a large mortgage. ASIC Moneysmart points out that premiums are deducted from your retirement savings, which can impact your final balance. Use this calculator to compare your Super-based coverage against your actual financial needs to see if you have an 'insurance gap' that needs addressing.

ASIC Moneysmart – Insurance inside Super

TPD and Income Protection in Australia

Life insurance in Australia is often bundled with Total and Permanent Disability (TPD) and Income Protection. The Australian Institute of Health and Welfare (AIHW) notes that disability can be as financially devastating as death. Our tool helps you calculate the necessary TPD 'lump sum' needed to pay off debt and modify your home, ensuring your plan is robust for all life's major Australian risks.

AIHW – Health Conditions

Tax Deductibility of Premiums

In Australia, premiums for standard life insurance (Death cover) and TPD are generally not tax-deductible for individuals. However, Income Protection premiums are usually tax-deductible if held outside Super. The ATO allows these deductions to reduce your taxable income. This calculator helps you understand the 'net' cost of your insurance after considering these Australian tax advantages.

ATO – Income Protection

What is the 'Insurance Gap' in Australia?

Various industry reports have highlighted a significant 'underinsurance gap' in Australia, particularly for families with young children. Many households have less than 30% of the coverage they actually need to maintain their standard of living if a breadwinner passes away. This calculator uses detailed Australian spending data to show you your real 'number' for peace of mind.

How do Australian life insurance 'traumas' work?

Trauma insurance (or Critical Illness) pays a lump sum if you are diagnosed with a specific condition like cancer or a heart attack. It is very common in the Australian market to help cover out-of-pocket medical costs not fully met by Medicare. Our tool allows you to factor in a 'recovery fund' amount into your overall insurance planning profile.

Is the death benefit taxable for my beneficiaries?

In Australia, a life insurance payout to 'financial dependents' (like a spouse or minor child) is typically tax-free if paid from a private policy or a Super fund. However, if paid to non-dependents from a Super fund, there may be a 'taxable component'. Our tool helps you plan your nominations to minimize this tax impact for your family according to current ATO rules.

Why Life Insurance?

Life insurance provides financial protection for your dependents if you pass away. It replaces your income, pays off debts, and covers future expenses like children's education.

Calculation Method

This calculator uses the "needs analysis" approach which sums income replacement (using annuity present value), outstanding debts, education costs, and final expenses, then subtracts existing coverage.

Term vs. Permanent Insurance

Term insurance provides coverage for a specific period (10-30 years) at lower costs. Permanent (whole life) insurance offers lifelong coverage with cash value, but costs significantly more.

When to Re-evaluate

Review your insurance needs after major life events: marriage, children, home purchase, job change, or debt payoff. Your needs change over time.

Rule of Thumb

A common rule is to have 10-12x your annual income in life insurance coverage. However, this calculator provides a more accurate analysis based on your actual needs.