Life Insurance Calculator
Work out a needs-based estimate of how much life insurance your family might actually need, based on your debts, expenses and existing resources, not a generic multiple of your salary. This is general information only, not personal financial advice, so confirm your own numbers with a licensed financial adviser.
Built and checked byTimothy Hirou GaschereauFigures verified at the source on
Your details
Estimated life insurance gap
$1,112,718
Total need
$1,282,718
Income replacement total
$767,718
Existing resources
$170,000
This is a needs-based starting point, not the industry-discredited 'multiply your salary by 10' rule. The income-replacement figure is the present value of the income stream, discounted by the real return you entered, since a lump sum keeps earning while it's drawn down. Set that return to 0 for a simple income-times-years total. Try MoneySmart's own life insurance calculator for a more detailed estimate, and speak with a financial adviser before buying cover. Not financial advice.
How to use this calculator
- 1. Enter what your family would need to clear your debts and cover funeral and immediate costs.
- 2. Enter the annual income your family would need replaced, and for how many years.
- 3. Enter your existing savings and any life insurance you already hold, including default cover through super.
- 4. The calculator shows your total need, your existing resources, and the gap between them.
Two ways to work out how much cover you need
Income replacement (a quick rule of thumb). You'll see "10 times your annual income" repeated all over the internet, sometimes stretched to 10-15x for someone with a long working life ahead of them. It's fast, but it isn't an official standard from ASIC or any licensed adviser body, and it ignores your actual debts, your partner's income, your super balance and how many kids you've got. Treat it as a sanity check, not a real answer.
Needs-based (the approach ASIC Moneysmart recommends, and what this calculator uses). Add up what your family would actually need to cover, then subtract what they'd already have access to: cover needed equals your immediate needs plus your ongoing needs, minus your available assets. Immediate needs are your outstanding mortgage and other debts, funeral and estate costs (commonly $10,000 to $20,000), and any lump-sum costs like childcare or education. Ongoing needs are your family's annual living expenses multiplied by however many years they'd need support, plus any future education costs. Available assets to subtract include your existing super balance, savings and investments, and any life insurance you already hold, including default cover through super. Whatever's left is the gap a standalone policy needs to fill. For a deeper walkthrough of this method, including the DIME framework some planners use, see our guide to how much life insurance you actually need in Australia.
Worked example: the Nguyen family
Linh (35, a nurse earning $95,000 a year) and Minh (34, a part-time graphic designer earning $55,000 a year) have two kids, aged 4 and 7, a $620,000 mortgage and a $18,000 car loan, plus $45,000 in combined savings. Linh wants to know how much standalone cover she'd need on top of the $130,000 in default cover she already holds through her super fund. Here's how the numbers plug into this calculator's fields.
| Calculator field | Amount |
|---|---|
| Outstanding debts (mortgage $620,000 + car loan $18,000) | $638,000 |
| Funeral and final expenses | $15,000 |
| Annual income to replace, for 10 years ($60,000 x 10) | $600,000 |
| Children's future education costs | $40,000 |
| Total need | $1,293,000 |
| Existing savings and investments (Linh's super $68,000 + her half of shared savings $22,500) | ($90,500) |
| Existing life insurance (default cover through super) | ($130,000) |
| Estimated life insurance gap | ~$1,072,500 |
Run those figures through this calculator and you land on roughly $1.07 million, far more than the $130,000 in default cover Linh already carries. That figure is a touch higher than a fully discounted needs analysis would give, since this calculator (like MoneySmart's own quick estimate) doesn't discount the income-replacement total for the investment returns a lump sum could earn while it's being drawn down, which in reality would trim the number a little. Treat it as a conservative, slightly rounded-up starting point rather than a precise underwriting figure.
Life insurance inside super vs a standalone policy
Most Australians already have some life cover and don't realise it. Per APRA (June 2025) and ASFA (March 2025), 8.8 million Australians held life insurance through super in the year to June 2024, and around 70% of members sit at whatever default level their fund set, rather than a figure calculated against their actual mortgage or dependants. The median age-weighted default death cover across funds was around $135,000 in a 2024 survey, and it typically shrinks as you age under a stepped design (roughly $183,000 at 32, declining to around $9,000 by 59). Since 1 April 2020, members under 25 or with a super balance below $6,000 generally don't get automatic default cover unless they opt in. As our guide to underinsurance in Australia covers in more depth, that default figure is rarely enough on its own for a family with a mortgage and young kids.
| Through super | Standalone | |
|---|---|---|
| Premiums | Generally tax-deductible to the fund, not you personally | Not tax-deductible (income protection held personally is the main exception) |
| Payout to a tax dependant | Generally tax-free lump sum | Generally tax-free |
| Payout to a non-tax dependant | Taxable component taxed at up to 32%, an easy detail to overlook | Generally tax-free |
A tax dependant is broadly a spouse or a financially dependent child. Our guide to life insurance through super walks through the full trade-offs, including how ongoing premiums quietly erode your retirement balance through lost compound growth.
Two related products are easy to confuse with life insurance itself. TPD (Total and Permanent Disability) cover pays a lump sum if you're permanently unable to work; 8.1 million Australians held TPD cover through super in 2024, with median default cover around $129,000. Income protection replaces up to 70% of your income if you're temporarily unable to work due to illness or injury, and, unlike life insurance, it doesn't pay out on death. Our beginner's guide to life insurance in Australia breaks down how all four products (life cover, TPD, trauma and income protection) fit together under the one "life insurance" umbrella term.
What affects your premium?
Age is the biggest single factor. Canstar's 2025 research on $500,000 of cover for a non-smoker found roughly $29 a month at age 30, $43 a month at 40, and $101 a month at 50, more than triple the cost of starting a decade earlier.
Smoking status matters almost as much. Finder's comparison data shows smokers typically pay 77-132% more than non-smokers for the same cover. For $1 million of cover, a 55-year-old smoker might pay around $438 a month against roughly $155 a month for a non-smoker.
Occupation also shifts the price. Office-based professionals get the cheapest rates, tradespeople, construction workers and miners face higher premiums or loadings, and some higher-risk roles may find certain types of cover simply unavailable.
Other factors insurers weigh include your sum insured, gender, health and medical history, hobbies like skydiving or motorsport, whether your premium is stepped or level, and how often you pay (annual payment is often discounted against monthly).
Stepped vs level premiums
Stepped premiums start lower and climb every year as you age, cheap upfront but often significantly more expensive from your 50s onward, which makes long-term budgeting harder. Level premiums start higher but are designed to stay relatively stable over time, though they're not completely frozen either, insurers can still reprice for indexation or across a whole product line, so it's worth checking the PDS. As a rule of thumb, someone in their 30s planning to hold cover for 20 or more years often comes out ahead on level premiums, while someone with a shorter horizon, say cover until the mortgage is paid off in 10 years, may find stepped premiums more economical. Compare actual quotes rather than relying on the rule of thumb alone.
Common misconceptions worth clearing up
"My super's default cover is enough." For many families, it isn't. Median default death cover sits around $135,000, unlikely to cover a family with a $600,000 mortgage and two kids. Check your fund's insurance guide for the actual dollar figure and consider topping it up.
"Life insurance covers me if I'm too sick to work." It doesn't. Life insurance pays out on death. Income protection replaces up to 70% of your income temporarily, and TPD pays a lump sum if you're permanently unable to work. They're separate products for separate situations.
"I'll get cover later when I can afford it." Premiums are priced against your age and health at the time you apply. Waiting means paying more, and a health change in the meantime, a diagnosis, a condition, an injury, could make you uninsurable or attract a premium loading. The cheapest time to get cover is almost always now.
FAQ
What does life insurance actually cover?
It pays a lump sum to your nominated beneficiaries when you die, or in some cases if you're diagnosed with a terminal illness. It doesn't cover temporary illness, injury or disability, that's what income protection and TPD are for. Always read the PDS for the specific events covered and any exclusions.
How much life insurance does the average Australian need?
There's no universal figure, it depends on your debts, income, dependants and existing assets. A needs-based calculation typically lands somewhere between $500,000 and $1.5 million for a family with a mortgage and young children. ASIC Moneysmart's own calculator can help you get a personalised number.
Is the default cover in my super enough?
For most families, no. Median default death cover across Australian super funds sits around $135,000 (ASFA, 2025), which is unlikely to be enough if you have a mortgage or dependants. Check your super account for the current dollar figure and compare it against a needs-based calculation like this one.
How are life insurance premiums calculated?
Insurers weigh your age, smoking status, occupation, health history, gender, hobbies and the amount of cover you want. Age is the single biggest factor, premiums roughly double between 30 and 50 for the same cover. Smokers typically pay 77-132% more than non-smokers.
What's the difference between stepped and level premiums?
Stepped premiums start lower and rise every year with your age. Level premiums start higher and stay relatively stable over time. Stepped is usually cheaper upfront, level can be cheaper overall if you hold cover for many years. The right choice depends on your age, budget and how long you expect to need cover.
Are life insurance premiums tax-deductible in Australia?
Generally not for a policy held in your own name. The main exception is income protection insurance held personally, which is generally deductible under ATO rules, with any benefit payments treated as assessable income. Inside super, premiums are deductible to the fund rather than to you.
Do I need a financial adviser to get life insurance?
Not necessarily, you can buy directly from an insurer or through a comparison site without advice. A licensed adviser can help you work out the right cover amount, compare policy features, and structure cover tax-effectively, particularly the super versus standalone question, which is often worthwhile for more complex situations.
What happens if I die without life insurance?
Your estate passes to your beneficiaries under your will, or under intestacy rules if you don't have one, but without a payout your family may need to sell assets, including the family home, to cover debts. The impact is usually most severe for families with young children and a large mortgage.
When should I review my life insurance cover?
Whenever life changes significantly: buying a home, having a child, marriage or divorce, a major income change, starting a business, or a major health change. Review at least once a year, since cover that's right at 32 can be badly wrong by 42.
Can smokers get life insurance in Australia?
Yes, but they pay more, typically 77-132% higher premiums than non-smokers at the same age and cover level, according to Finder's comparison data. After 12 months smoke-free, the standard threshold for most Australian insurers, you can usually apply to be reclassified as a non-smoker for lower premiums.
Related reading
Income Protection and Redundancy: What's Actually Covered
Income protection does not cover redundancy. Here's what does, what your redundancy pay is actually worth, and how to genuinely protect yourself.
How Much Does Life Insurance Cost in Australia?
Life insurance cost in Australia: monthly premium ranges by age, what drives your rate, super vs standalone, and how to pay less without underinsuring.
How Does Life Insurance Work in Australia?
How life insurance actually works in Australia: how premiums are set, stepped vs level, inside vs outside super, beneficiary nominations, and how a claim is paid.
Where these numbers come from
Every rate and threshold in this calculator was read off the official page, not copied from another calculator. Check them yourself, they change.
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Disclaimer
This calculator gives a needs-based starting estimate, not a full underwriting figure or a formal insurance needs analysis. It doesn't discount the income-replacement total for the investment returns a lump sum could earn while being drawn down, or adjust for inflation over the replacement period, both of which would generally lower the real figure. Premium, tax and default cover figures referenced in the guide above are general only, sourced from APRA, ASFA and comparison sites like Canstar and Finder, and can change. This is general information only, not personal financial advice, and doesn't take into account your individual objectives, financial situation or needs. Speak with a licensed financial adviser before buying, cancelling or changing any insurance cover.