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How Much Cover Do I Need?

Calculating your insurance needs for personal insurance is crucial to ensure that you are over nor under insured. Being over insured means that you are paying more than necessary for coverage don't need, while being under means that you may not have enough coverage to protect your assets in case of an event. By accurately assessing your insurance needs, you can make sure that you have right amount of coverage to protect yourself and assets.

When deciding on the benefit amount for life insurance, TPD, income protection (IP), and trauma insurance, people need to consider various factors unique to each type of coverage.

Here’s what people generally evaluate when they calculalate theire insurance needs. 

Life Insurance Needs Calculation

  1. Current Debts: Consider mortgages, personal loans, and other outstanding debts that need to be paid off in the event of death.

  2. Dependents’ Needs: Calculate how much your dependents will require to maintain their lifestyle, including education costs, daily living expenses, and long-term financial security.

  3. Funeral and Estate Costs: Estimate the cost of funeral expenses, legal fees, and any other costs associated with settling the estate.

  4. Spouse’s Income: Factor in your spouse's ability to generate income or the likelihood they will need time off work to care for dependents.

  5. Future Financial Goals: Consider any savings goals such as college education funds, weddings, or retirement savings for your family.

Total and Permanent Disability (TPD) Insurance 
Needs Calculation

  1. Medical and Rehabilitation Costs: Account for potential ongoing medical treatments, therapies, or rehabilitation services that you may need after a disabling injury.

  2. Home Modifications: Consider potential home modifications like ramps, elevators, or specialized equipment to accommodate your disability.

  3. Living Expenses: Include daily living costs for yourself and your dependents, especially if you can no longer work.

  4. Future Income Needs: Estimate how much income will be lost due to your inability to return to work and calculate the amount needed to replace that income until retirement.

  5. Existing Disability Benefits: Factor in other disability or government benefits you may be eligible for and ensure your TPD amount supplements these.

Income Protection Needs Calculation

  1. Income Replacement: Typically, IP covers up to 75% of your pre-tax income. Ensure that this percentage will cover your living expenses, debt obligations, and lifestyle needs.

  2. Essential Expenses: Consider rent/mortgage payments, utilities, groceries, childcare, and other necessary expenses when determining your benefit amount.

  3. Length of Coverage: Factor in how long you’ll need the benefits (e.g., until you recover or retire). Choose a benefit period that provides sufficient financial security during the time you are unable to work.

  4. Emergency Savings: Consider the size of your savings and how long they can cover your needs before the IP benefits kick in (waiting period).

  5. Other Income Sources: Take into account any potential alternative income sources such as savings, investments, or support from a partner that might reduce the amount of coverage you need.

Trauma Needs Calculation

  1. Medical Expenses: Estimate potential costs for surgeries, medical treatments, medications, and ongoing care during recovery from a critical illness.

  2. Recovery Time: Determine how long you may need to recover fully and consider the impact on your ability to work or generate income during this time.

  3. Living Expenses: Factor in ongoing living costs for both yourself and your family during your recovery period, including rent/mortgage, bills, and childcare.

  4. Home and Lifestyle Adjustments: Consider the need for any home or lifestyle adjustments that may be required due to the illness (e.g., in-home care or specialized equipment).

  5. Existing Health Coverage: Assess whether your private health insurance or other medical coverage can cover some of the costs, and determine what trauma insurance will need to supplement.

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