We plan for holidays, home renovations, and retirement, but we’re less likely to plan for the unexpected. Life insurance is a quiet but powerful way to protect the people you love from financial challenges should something happen to you.
Whether you’re raising a family, supporting a partner, or building a business, life insurance helps ensure that your legacy includes stability rather than uncertainty. It can be a powerful tool for your family’s financial resilience.
Life insurance is designed to provide a lump sum payment to your nominated beneficiaries when you pass away or, in some cases, are diagnosed with a terminal illness. These payouts can help ensure that your loved ones aren’t left trying to cover costs such as mortgage repayments or rent, outstanding debts, funeral costs and living expenses.
It can be particularly helpful if:
- you have dependents who rely on your income;
- you’re your family’s primary source of income or contribute significantly to household finances;
- you have joint debts with a partner;
- you want to leave a legacy or charitable gift; or
- you’re a business owner.
Even if you’re young and healthy, life insurance can be affordable and locking in a policy early may mean lower premiums over time.
How much life insurance do you need?
There’s no one-size-fits-all answer, but a good starting point is to ask yourself: “If I were gone tomorrow, what financial gaps would my family face?”
Below is a simple framework to help you estimate your coverage needs:
- Calculate your financial obligations
Start by listing the major expenses your loved ones would need to cover:
- Mortgage or rent: how much is left to pay?
- Living costs: groceries, utilities, transport, childcare
- Children’s education: school fees, uniforms, university costs
- Debts: credit cards, car loans, personal loans
- Funeral and legal costs: can be around $10,000–$20,000Add these figures up to get a baseline figure.
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Consider your income
How long would your family need financial support? Multiply your annual income by the number of years you’d want to replace it, for example, five to ten years.
If you earn $100,000 and want to provide seven years of income, that equals to $700,000.
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Factor existing assets
Do you have savings, superannuation, or investments that could help cover costs? Subtract these from your total needs to avoid over-insuring.
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Account for inflation and future needs
Costs rise over time, and your children’s needs will evolve. It’s wise to build in a buffer of approximately 10% to 20% to future-proof your coverage.
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Review regularly
Your life changes, and so should your insurance. Marriage, children, mortgages and career shifts can all affect how much cover you need. Our team can help with regular reviews to ensure your policy stays aligned with your goals.
Different types of life insurance
There are a few key types of cover to be aware of:
- Term life insurance pays a lump sum if you die or are diagnosed with a terminal illness.
- TPD (total and permanent disability) covers you if you’re permanently unable to work due to illness or injury.
- Trauma insurance pays a lump sum if you’re diagnosed with a serious illness like cancer or stroke.
- Income protection replaces a portion of your income if you’re temporarily unable to work.
Life insurance in super
For many Australians, life insurance is already within their superannuation fund. Most super funds automatically include a basic level of life cover and TPD insurance, and some also offer income protection.
Premiums are typically lower than retail policies and are deducted from your super balance. In many cases, you won’t need to complete a health check to obtain default cover, and the premiums may be more tax-effective depending on your circumstances.
While insurance in super is convenient, it’s not always comprehensive and it’s not guaranteed to suit your needs in the long term.
If you’re relying on insurance through super, it’s important to review your fund’s policy and consider whether it’s enough, especially if your circumstances have changed.
Next steps
If you’re unsure where to begin, we’re here to help you create an insurance plan that aligns with your values and responsibilities.
To ensure you’re always ready for what’s next, speak with your local Nexia Adviser today to discuss what insurance options are best for you and your family.
