How much Life Insurance do I need?

By AAMI 01 July 2021

Choosing a suitable life insurance policy isn’t always simple. You want to be sure your chosen benefit amount will be able to support your dependents should you pass away or become terminally ill, while also ensuring that you can afford the monthly premium.

Your chosen level of coverage should also be based on real and relevant calculations, as there’s no one-size-fits-all approach to Life Insurance. Research from independent consultancy group Rice Warner1 reveals that the median level of cover among Australians only covers 64% of their basic needs and 42% of the amount required to maintain their dependents’ standard of living.

In order to avoid being underinsured like this, it’s vital to understand:

the sum insured that’s suitable for you
the breadth of your coverage, and
the reality of your expenses and debts.

How do I estimate my Life Insurance needs?

Understand your living costs

Comb through your budget to identify the day-to-day living costs that your loved ones will need to continue paying should anything happen to you. These expenses might include:

rent or mortgage
groceries
transport and fuel
education (consider regular school expenses as well as whether you plan to pay for your children’s tertiary education)
entertainment and eating out
medical (including routine appointments, regular medications and ongoing medical treatment if applicable)
other forms of insurance (such as car, home or health insurance), and
long-term costs such as house maintenance or vehicle upgrades.

Once you have worked out your net monthly expenses, calculate your annual total expenses. Then, think about how many years you want to cover your family for (eg, until your youngest child turns 18).

Try the AAMI Life Insurance calculator

If number-crunching isn’t your strong suit, try AAMI’s Life Insurance calculator . After generating your estimate, make sure to read the Product Disclosure Statement for the particular life insurance policy you’re looking at.

Understand your debts

If you have co-signed on a loan, your partner might need to continue paying off the mortgage or car loan on their own if you pass away or become terminally ill.

If you take on more debt, it may be appropriate to increase your cover. Conversely, you might want to reduce your cover as you pay down debts.

Consider optional extras

Life Insurance is a deeply personal decision. You might decide to add optional Major Illness and/or Cancer Cover to your AAMI Comprehensive Life Insurance policy, which is a lump sum payment of up to $250k that can be paid out of your total Life benefit if you’re diagnosed with a defined critical illness of a specified severity. Alternatively, you can choose to take out AAMI Comprehensive Life Insurance, without the optional cover, which offers:

Up to $1.5 million cover (subject to eligibility criteria)
Up to $10,000 advance payment (upon death)
Cover until your 99th birthday

Explore AAMI Life Insurance

¹ https://www.ricewarner.com/rice-warners-latest-underinsurance-research-report/

AAMI Life Insurance products issued by TAL Life Limited ABN 70 050 109 450 AFSL 237848 (TAL Life) which is part of the TAL Dai-ichi Life Australia Pty Limited ABN 97 150 070 483 group of companies. TAL Life products are marketed by Platform Ventures Pty Ltd ABN 35 626 745 177 (PV). PV is part of the Suncorp Group and an authorised representative of TAL Direct Pty Limited ABN 39 084 666 017, AFSL 243260. PV receives commission from TAL. TAL companies are not part of the Suncorp Group and use the AAMI brand (a Suncorp network brand) under licence. The information provided on AAMI Life Insurance products is general advice only and does not take into account your individual needs, objectives or financial situation. Before you decide to buy this product, read the Combined Product Disclosure Statement and Financial Services Guide. The Target Market Determination (TMD) for the product is available on our website.