How much insurance do you actually need?
Most people either under-insure without realising it, or hold a policy they were sold years ago that no longer matches their life. The starting point isn't a product — it's working out what would actually need to be covered if things went wrong, then matching cover to that.
The four main types, and what each one is actually for
| Cover | Pays out when | Typically covers |
|---|---|---|
| Life insurance | Death, or a terminal illness diagnosis | Debt payout, income replacement for dependants, final expenses |
| Total & Permanent Disability (TPD) | You're permanently unable to work in your occupation, or any occupation, depending on definition | Debt payout, lump sum to fund a changed lifestyle |
| Trauma / critical illness | Diagnosis of a specified condition (cancer, heart attack, stroke, etc.) | Lump sum for treatment costs, time off work, lifestyle adjustment |
| Income protection | You can't work due to illness or injury, temporarily or long-term | Ongoing monthly income, usually up to 70–90% of pre-disability earnings |
They're not interchangeable. Someone with no dependants and no debt may need very little life cover but still want strong income protection. Someone with a mortgage and young children usually needs meaningful life and TPD cover, on top of income protection.
A practical way to size life cover
Rather than picking a round number, work from what the payout would actually need to do:
- Clear existing debt — mortgage, personal loans, any business liabilities you're personally guaranteeing.
- Replace income for as long as your family would need it — often until the youngest child is independent, or a surviving spouse reaches their own retirement.
- Fund future costs you'd otherwise have covered — education, ongoing childcare, or aged care for a dependent parent.
- Cover final expenses and any tax that might apply to superannuation death benefits paid to non-dependants.
Add those up, subtract existing assets and cover you already hold, and what's left is a far more accurate number than any rule-of-thumb multiple of salary.
Income protection is the one people underrate
Statistically, you're far more likely to be unable to work for an extended period due to illness or injury than you are to die during your working life. Yet income protection is often the first cover people cut when reviewing costs, or the one they never got around to setting up properly. It's worth checking the waiting period (how long before payments start) and the benefit period (how long payments continue), and understanding exactly how your income will be assessed at claim time if it's changed since the policy started.
Cover isn't a "set and forget" decision
A policy that made sense when you were 28, renting, and childless is rarely still the right one after a mortgage, kids, or a business. Reviewing cover after any major life change — and at least every few years regardless — is the difference between paying for insurance that actually matches your life and paying for insurance that matched a version of it that no longer exists.
Not sure if your current cover still fits?
Book a free, no-obligation review and we'll work out what you actually need.
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