This article is general information only and does not constitute personal financial advice. Everyone’s situation is different — speak with a licensed financial adviser before making decisions about your insurance.
When Australians ask how much life insurance do I need, there’s rarely a simple answer. The right amount varies based on your financial situation, the people who depend on you, your existing assets, and your long-term goals. This guide explores the factors Perth residents commonly consider when thinking through their coverage needs.
Life insurance is designed to provide a financial payout to your nominated beneficiaries if you die. For families where one or both partners earn income, that payout can help cover expenses that would otherwise be difficult to meet — things like mortgage repayments, childcare, school fees, and everyday living costs.
In Perth and Western Australia, where property values and cost of living have risen considerably in recent years, many families find themselves with larger financial commitments than previous generations. Understanding the factors that go into a life insurance calculation is a useful starting point for a conversation with a financial adviser.
When working through life insurance needs, a licensed adviser will generally look at several areas. Understanding these in advance can help you prepare.
A common starting question is: if you were no longer here, what income would your family need to maintain their current lifestyle — and for how long? Some financial professionals use rules of thumb (such as replacing a number of years of after-tax income), but these are general starting points, not formulas. Your actual situation may be quite different.
For context: if someone earns $80,000 per year after tax, ten years of income replacement would amount to $800,000 — before accounting for any existing assets or cover they already hold.
Debts that continue after death are a significant consideration in any life insurance discussion. These commonly include:
Note: HELP/HECS student debts are generally written off at death and are typically excluded from these calculations.
If you have children or other dependants, there are ongoing costs to factor in. People often think about:
Funeral costs in Australia can range from around $10,000 to $15,000 or more, depending on the type of service. Estate administration costs may also apply. These are often included in life insurance calculations as a separate line item.
If your partner earns an income, that changes the picture. If they don’t work, or work part-time, there may be a period where retraining or returning to the workforce is needed. This is a personal calculation that varies enormously from one household to another.
Many financial advisers work through a structured calculation with clients. The general framework looks something like this:
Step 1 — Income replacement: Annual after-tax income × number of years of support needed
Step 2 — Outstanding debts: Total of all remaining loan balances
Step 3 — Dependant costs: Estimated annual costs × number of years of support needed
Step 4 — Final expenses: Funeral and estate administration costs
Step 5 — Subtract existing cover and assets: Any existing life insurance, superannuation death benefit, or savings that would be available
The result gives a rough figure to discuss with an adviser — not a recommendation in itself, but a useful starting point.
Families with young children often have the longest coverage horizon. Mortgage balances may be high, children are years away from financial independence, and childcare or school costs are ongoing. These factors tend to push the coverage conversation toward higher figures, though every family’s numbers are different.
Where one partner is the primary or sole earner, the financial impact of that income disappearing is more acute. Advisers often explore what it would take for the remaining partner to maintain stability — including time to potentially re-enter the workforce.
Both partners in a dual-income household typically carry some degree of life insurance, though the amounts will reflect their individual income, debts, and dependant responsibilities. It’s generally worth working through each partner’s position separately.
Life insurance for business owners involves additional complexity — including potential key person cover, business succession funding, and buy-sell agreements.
Life insurance needs often change significantly in retirement, as income replacement becomes less relevant. Some retirees carry cover to address final expenses or estate planning goals.
Many Australians have life insurance (called a death benefit) through their superannuation fund and aren’t aware of it, or don’t know the amount. Checking your super statement is a useful first step before any life insurance review.
Costs rise over time. A calculation based on today’s expenses may understate what’s needed in 10 or 15 years if inflation isn’t factored in.
Life insurance coverage is generally considered alongside what your family already has — savings, investments, superannuation, and any existing policies. A lump sum payment from life insurance is one piece of the picture, not the whole picture.
Once you have a sense of the coverage amount, there are different product types to understand. Your adviser can explain which structures may suit your situation.
Provides a lump sum payout if you die within a nominated period (such as 10, 20, or 30 years). Premiums are generally lower than permanent cover. It’s a commonly used structure for people with mortgages and dependants, though suitability depends on individual circumstances.
Technically separate from life insurance, income protection covers a portion of your income (generally up to 70%) if illness or injury prevents you from working. It’s often discussed alongside life insurance as part of an overall risk protection strategy.
Perth’s property market has seen significant price growth, which affects the mortgage balance most households are carrying. Western Australia’s economy is also closely tied to the resources sector, which can create income volatility for some households. These are all factors a Perth-based adviser familiar with local conditions can help you work through.
Working through a life insurance calculation on paper is a useful exercise — but the numbers only tell part of the story. A licensed financial adviser can review your complete financial situation, explore the options available to you, and help you understand what different levels of coverage might mean in practice for your family.
At Advice360 in Perth, we work with clients to understand their situation in full before discussing insurance. Contact us to arrange a conversation.
This article contains general information only. It does not take into account your personal objectives, financial situation, or needs. Before acting on any information in this article, consider whether it is appropriate for your circumstances and speak with a qualified financial adviser.