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Life Insurance Calculator
Life Insurance Calculator
Coverage Gap
$1,885,000
Protection Analysis
Your household needs about $2,215,000 in total protection (25× income). After your $330,000 in assets and existing coverage, the gap is $1,885,000. At age 35, a 20-year term policy covering that gap would cost roughly $211.41/month — term insurance is cheapest when you are young and healthy, and locking a rate now protects against becoming uninsurable later.
*Estimates protection needs using an income-multiplication method and indicative term premiums. Actual underwriting, health ratings and premiums vary widely by insurers. Check your super fund's default death and TPD cover before buying. Educational only, not insurance advice.
Life Insurance Is Income Insurance
Life insurance is the only financial product that exists entirely for the moment when its owner is not around — which is exactly why most Australians under-buy it. Industry research consistently finds a coverage gap: households estimate they would need several hundred thousand dollars to survive the loss of a primary earner, yet the cover actually in force covers only a fraction of that. Default cover inside superannuation — which most workers receive automatically — typically pays a fixed amount such as $150,000 to $250,000, an amount that erodes in real terms every year and rarely matches a mortgage, let alone a family's lost income. The function is simple: replace economic value. The income your family would lose over your remaining working years, the debts that would fall on a surviving spouse, the school fees that would evaporate, and the final expenses nobody plans for — Australian funerals alone average $8,000 to $15,000. Against that, you subtract what already exists: savings, investments, and the death and TPD cover held inside your super. The difference is the protection gap, and for most families under 50 it is real. Retail term life insurance has quietly become remarkably cheap for healthy applicants, often costing less per month than a streaming subscription for cover that runs into seven figures. The question is not whether insurance matters; it is whether you have priced your actual gap.
The DIME Method, Formalised
This tool uses the standard industry DIME framework — Debts, Income replacement, Mortgage, and Education — merged into explicit line items. Income replacement equals your annual income multiplied by the number of years your family would need it; financial planners typically use the years until the youngest child finishes school or the surviving partner can re-enter a career, commonly 15–25 years. Add debts to close (so the surviving family starts with a clean balance sheet — mortgage, car loan, personal loans and any credit card balances), an education fund sized for your plans, and final expenses. The gross need is then reduced by existing resources: liquid assets that would support the family and life cover already in force — including the default death cover held inside your super fund, which you can find on your annual statement. The remainder is the coverage gap — the face amount to buy. The premium estimator applies an age-adjusted proxy: term pricing scales roughly exponentially with age (about 4–8% per year), so the same $500,000 policy costs dramatically more at 50 than at 35. Stepped premiums rise with each birthday, while level premiums lock a higher price for the term — which is why the calculator rewards running the numbers young: the gap rarely shrinks fast enough to outrun the premium curve.
Expert Insights
Term Is the Default Choice for a Reason
For most families, 15- or 20-year term insurance delivers the needed coverage at a fraction of the premium of permanent policies, and the savings can be invested in accounts you control — extra super contributions, an ETF portfolio, or an offset account. A $750,000 20-year term policy for a healthy 35-year-old often costs around $50–70/month. Whole-of-life and endowment policies bundle insurance with an inefficient investment component, high surrender charges and complexity most buyers never fully understand; they fit narrow estate-planning niches, not standard family protection.
Default Super Cover Is a Supplement, Not a Plan
The death cover that arrives automatically with most MySuper accounts — often one fixed insured amount with no medical underwriting — is a bonus, not a foundation. It is usually too small to clear an average capital-city mortgage, it erodes with inflation unless you actively index it, and it can lapse if contributions stop flowing into the fund. Run this calculator counting super cover as existing protection, but buy the gap with a retail policy you own: underwritten at today's health rating, portable between jobs, and immune to a future fund switch or career change.
Insurability Is a Wasting Asset
You can always buy more coverage later if you are healthy; you cannot buy any coverage after a diagnosis. Every year, a percentage of applicants develop conditions — hypertension, elevated blood glucose, mental health treatment — that raise premiums or close the market entirely. A healthy 32-year-old who locks a 20-year rate keeps it through whatever their thirties and forties bring. The option value of being insured before you need to be is one of the cheapest forms of financial insurance available, and it is the reason waiting for the 'right time' is usually the most expensive decision of all.
Actionable Tips
- 1
Size the Gap Before You Shop
Run this calculator with real numbers from your statements — not guesses. Most people overshoot debts (forgetting the mortgage is already partly repaid) and undershoot income years. The output tells you the face amount to quote; then get quotes from at least three insurers or use a broker who shops the whole market, including policies available through industry super funds. Term pricing varies 30–50% between insurers for the same applicant, so the first quote you see is almost never the best price available to your health profile.
- 2
Ladder Coverage Instead of Buying One Big Policy
Split the gap across terms that match expiring obligations: $600,000 for 20 years while the kids are young, plus $400,000 for 15 years, plus $250,000 for 10 — instead of one $1.25M policy. As obligations burn down, policies expire and premiums step down with them. The ladder saves 20–30% versus a single long term for the same total early coverage, and it mirrors how the need actually declines as your mortgage shrinks and your super balance grows.
- 3
Re-run the Numbers at Every Life Event
Marriage, a child, a home purchase, a refinance, a salary jump — each one moves the equation. Set a yearly reminder and run the calculator again; coverage that fit five years ago can be dangerously thin today, or wastefully oversized after a decade of building assets and paying down debt. Adjusting coverage at transitions is free; discovering the gap at the wrong moment is not. And check your super statements annually — default cover can be cancelled for inactivity without you noticing.
Real-World Examples
The Nguyen Family Bought the Gap for $61 a Month
David, 34, assumed his super's default cover — $210,000 with no medical questions — was enough. The calculator showed his family would need $3.1M (income for 22 years, a $540k mortgage, private school for two) against $270k of resources: a $2.8M gap. He bought a $1M 20-year term and a $1M 15-year term for about $122/month total, and doubled the insured amount inside super for the rest. Three years later, a colleague's default cover was cancelled for inactive accounts mid-illness; David's underwritten retail policy stayed exactly where it was.
Aisha Laddered Her Way to a Cheaper Plan
Aisha, 38 and newly a homeowner in Brisbane, was quoted $118/month for a single $1.5M 20-year term. Instead she ladder-built: $700k for 20 years (to carry the kids through school), $500k for 15 years (income bridge), $300k for 10 years (mortgage protection). Total coverage matched, but the blended premium came to $74/month, falling sharply once the first rung expired. Same protection in the years that mattered, and the policy structure burned down exactly as her real obligations did.
The Cost of Waiting: Mark Repented at 48
Mark knew he should buy cover at 40 but postponed it 'until things settled down'. At 48, a routine checkup found high blood pressure — manageable, but enough to move him out of the best rate class. The $750k 20-year policy he finally bought cost about $135/month; the identical policy at 40 with clean vitals would have been roughly $55. Eight years of hesitation cost him nearly $80/month forever, and he no longer qualified for the 25-year term he had once been offered.
Glossary of Terms
- Term Life Insurance
- Coverage for a fixed period (10–25 years) at a locked or stepped premium — pure protection with no savings component. It is the cheapest way to buy large insured amounts and the standard recommendation for family income replacement.
- Default Super Cover
- The death and TPD insurance a super fund provides automatically to members without medical underwriting. Convenient but typically a fixed insured amount that erodes with inflation and may lapse if contributions stop.
- Stepped vs Level Premiums
- Stepped premiums rise with your age each year — cheap now, expensive later. Level premiums are fixed for the policy term — dearer at the start but cheaper over long horizons. The crossover typically lands in your late 50s to early 60s.
Frequently Asked Questions
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.