A Practical Starting Formula
Rather than picking a round number, a useful starting point for life cover is to add up what your dependants would actually need to replace or pay off, then subtract what you already have.
- Outstanding mortgage and other debts (so your family isn't forced to sell the home)
- Ongoing income replacement — a common rule of thumb is 10 times your annual income, though your actual dependants' timeframe matters more than a fixed multiple
- Future costs specific to your family — school fees, childcare, or a partner's reduced working capacity while caring for young children
- Funeral and immediate expenses (often underestimated — these can run to $10,000-$15,000)
- Minus existing cover, including any default cover already held through super
For TPD and Trauma
Rather than a multiple of income, these are more sensibly sized around a specific financial buffer: enough to clear debt, fund home modifications if needed, and replace income for a realistic recovery or adjustment period — often a smaller sum than life cover, since income protection is designed to handle the ongoing income gap separately.
For Income Protection
Insurers generally cap this at 70–75% of your pre-tax income by design — there's usually no meaningful decision to make on the amount beyond confirming the insurer has your income correctly documented, since you can't over-insure beyond that cap.
Revisit It, Don't Set and Forget
A sum insured calculated when you were 28 with no mortgage and no kids is very likely wrong by 38 with both — reviewing cover after a major life event (buying a home, having a child, a large pay rise) is one of the most commonly missed steps in personal insurance.
This page is for educational purposes and isn't personalised financial advice. Premiums, terms and eligibility vary by insurer, occupation and individual circumstances — always check the Product Disclosure Statement (PDS) before buying.