What Level of Life Insurance Should I have?

Get a quote

All good personal risk advisers will have a rigorous process they follow to ensure that any recommendation made takes into account what you would want or need for yourself or your dependents in the case of your death. Their aim is to provide a personal risk management strategy that supports your family’s lifestyle and financial plan on an ongoing basis. As such there is no set formula that quantifies the sum of insurance you require.

As part of the fact-finding process used by an adviser when interviewing you there are a number of financial questions that are asked. The response to these questions combined with a personal needs analysis will enable the adviser to formulate their recommendation.

When considering term life insurance there are a number of simple questions that you can ask yourself which will help to provide an indication of the likely amount of cover required. This should not be used other than as a guide and to help prepare for a discussion with an adviser. Simply place an estimated after tax value against each entry in the list below.

Immediate Needs

  • What is the value of your personal and business debt (including mortgage)?
  • What is the value of replacing ageing assets such as your car?
  • What is the value of your children’s future education?
  • What is the value of one month’s salary (emergency fund)?
  • What would you like to provide for funeral costs?
  • What is the value of paying out any other items or assets not already covered?
  • What is the value associated with future life goals (overseas trips, holiday house, etc.)
  • TOTAL this section (A)

Ongoing Needs

This section is calculated by converting annual income to a capital sum by dividing it by an assumed earning rate of 5%. This lump sum then funds the income requirements through earnings.

  • What is the value of your annualised after tax income divided by 5%?
  • TOTAL this section (B)

Current Assets

  • What is the value of your investments (excluding mortgage)?
  • What is the value of your current term life insurance cover?
  • What is the value of your other assets not covered in earlier sections?
  • TOTAL this section (C)

Your likely cover requirements are then (A) + (B) – (C).

As a check this value should be at least 10 times your average annual salary, perhaps a lot higher. This is very much a ‘status quo’ situation and indicative of what you may provide for your beneficiaries to maintain their lifestyle. You should also consider the same process for your spouse or partner so that they provide for your future should they pass away unexpectedly.

This is a very generalised approach and does not take into account your particular insurance objectives, broader financial situation and needs. Your next step should be to speak with a qualified insurance adviser who will help you determine what insurance cover is right for you and your family.

Helpful insurance info

We compare insurance options from Australia's most trusted providers:

About MultiCover

MultiCover is a free service designed to provide you with easy access to a range of financial service specialists that cover the important things in life, Family, Work and Play. Simply choose and select from a range of options.

We aim to provide you with not only choice in financial services and products, but also options in how you can shop, compare and select these financial products and services. Many of our customers like to speak directly with a specialist about the product or service they are considering, gaining the benefit from their experience and customising a solution. Others prefer

learn more about us

Insurance Info

Visit our channel

MultiCover is a referral service and not a financial service provider. The information on our website and other documentation is of a general nature only and does not take into account your personal financial situation, needs or objectives. None of this information is, or shall be deemed to constitute financial and/or other advice to purchase a product or service. We strongly recommend that you obtain professional advice prior to purchasing any financial product and/or service. Please see our site Terms of Use and Privacy Statement for more information.

We need some information about you to get started:


*Submitting your details and agreeing to our terms of use enables us to connect you to a Synchron insurance specialist who will provide the quote by email or phone.

VIDEO TITLE

Get an insurance quote