Life cover needs gap.
Additional cover needed
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Total need
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Cover the debts, then replace the income
Life insurance is not about putting a price on a person. It is about making sure that if you die, the people who depend on you can clear the debts and keep living without a financial crisis layered on top of grief. This calculator uses a clean, transparent version of that idea. It adds your total debts including the mortgage to a multiple of the income you want to replace, then subtracts the cover and assets you already have. What remains is the gap, the additional cover you actually need to buy.
The formula here is deliberately simple: debts plus income times the years you want it replaced, less existing cover and assets. The mortgage is folded into the debts figure rather than counted separately, so enter your full outstanding loan balance along with any other debts in that one field. It is a sum you can sanity check on the back of an envelope, which is exactly the point.
The default super cover gap
Most working Australians already hold some life cover automatically, bundled inside their superannuation fund. The problem is that this default cover is usually modest, often somewhere around $100,000 to $200,000, which is nowhere near enough for a family carrying a mortgage. The whole purpose of this tool is to expose the distance between that default amount and what your household would genuinely need. Seeing the two side by side is often the moment people realise how exposed they are.
A family with a $500,000 mortgage
Using the defaults: $500,000 of debts including the mortgage, a $90,000 income to be replaced for 10 years, and $200,000 of existing cover and assets, mostly the default super policy. The maths is straightforward.
| Component | Amount |
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The household needs $1.4 million in total, but only holds $200,000, leaving a gap of $1.2 million to insure. If the family relied solely on the default super cover, the survivors would clear barely a third of the mortgage and have nothing left to replace a decade of lost income. That is the gap this calculator is built to make visible.
Choosing the income years, and a structuring tip
The number that swings the result most is how many years of income you replace. Ten years is a common default, but a family with young children might choose enough years to see the youngest through school, while a couple near retirement with grown children might need far less. Think about the period your dependents genuinely could not cope without your income, not an arbitrary round number. My practical tip: hold a chunk of your life cover inside super, where the premiums come from pre tax contributions and do not strain the household budget, but be aware a death benefit paid to a non dependent, such as an adult child, can attract tax, so name beneficiaries carefully and review them after any major life change.
Review the number after every life change
A life insurance need is not set once and forgotten. The figure this tool produces is a snapshot, and the inputs move with your life. A new baby adds years of income you would want replaced. Paying down the mortgage shrinks the debts component, which is why a couple in their fifties often needs far less cover than they did at thirty five. A pay rise, a second property, or a partner returning to work all shift the gap. My advice is to re run the calculator after any major event, because the most common failure is not buying too little at the start, it is never updating the cover as the mortgage falls and the children grow up, leaving people paying for far more than they still need.
Should I include my home in existing assets?
Be careful. The family home is usually where your survivors will keep living, so counting it as an asset that offsets your cover assumes they would sell it, which often defeats the purpose. Most people exclude the home from the existing assets figure and instead use life cover to clear the mortgage, leaving the family in a debt free house. Include liquid savings, shares, and existing insurance, not the roof over their heads.
Does this calculator account for investment returns on the payout?
No, and that is intentional for simplicity. It assumes the income replacement is spent down dollar for dollar over the chosen years. In reality a lump sum invested conservatively would earn some return, which could stretch it further, while inflation would erode it the other way. The two effects roughly offset over a typical horizon, so the straight multiple is a sound, slightly conservative starting estimate.