Insurance needs calculator

Disclaimer

 

This calculator is intended to provide an estimate of the amount of cover you may need from any income protection cover (which is based on your current income level) as well as any death and total and permanent disablement (TPD) cover you may require in the event of your death or disability.

This calculator and the outcomes produced in this calculator should be used as a guide only. The results should not be relied upon as a recommendation or an exact figure and do not take into account your ability to obtain the level of cover presented. Further, the results shown by the calculator are in today’s dollars. The availability of the estimated cover has not been assessed and cover may not be available to some customers depending on the eligibility criteria of an individual insurance product. Insurance needs are also different depending on individual circumstances and the type of cover you need will vary depending on your unique circumstances and requirements. Please read the relevant Product Disclosure Statement to understand what limits, conditions and exclusions apply to the different insurance covers.

The calculator is not financial advice and is not intended to be relied on for the purposes of making a decision in relation to a particular financial product. Before making any financial decisions consider your own financial circumstances, needs and objectives and consider getting professional financial advice. While the assumptions underlying this calculator are considered reasonable at the present time, these assumptions may change in the future.

The amounts of insurance estimated by the calculator may not be available for purchase. The amount of insurance and its availability will depend on your medical, financial, and personal circumstances when you apply. The calculator also does not include any information about fees and costs associated with insurance. You should contact your insurance provider directly for any eligibility, underwriting requirements, and actual costs of any insurance you apply for. You should reassess your insurance needs regularly as your circumstances may change and this could impact the amount of insurance you may require.

My Life Insured does not accept any liability, direct or indirectly, arising from any person relying, either wholly or partially, upon any information provided by, resulting from, shown in, or omitted from, the Insurance calculator. To the maximum extent permitted by law, My life Insured will not be liable (whether based in contract, tort, strict liability or otherwise) for any direct, indirect, incidental, consequential, or special loss or damage arising out of or in any way connected with by a user’s access to or use of this Insurance calculator.

It is important that you ensure that you have read and understood our assumptions and calculation methodology before using the calculator. The estimate provided by the calculator will depend (and may change) based on the assumptions and information provided. My Life Insured believes that the default assumptions on which the estimates are based are reasonable, as outlined in the sections below.

Last updated: 19 october 2023

Calculation methodology

This calculator estimates the amount of insurance you may require for:

• death
• total and permanent disablement (TPD),
• Trauma, and
• income protection.

In calculating this estimate, the following things are considered:

Death & TPD cover

• Debts/Liabilities – As part of calculating your death and TPD cover estimate, we can consider whether you have any debts or liabilities, as the level of cover you may need could increase if you want enough insurance cover to potentially pay off the debts you’ve specified (for example, your mortgage). Providing this information is optional.
• Assets – As part of calculating your death and TPD cover estimate, we can consider whether you have any assets that could be sold (excluding the effect of any debts or liabilities against those assets) , as these could potentially reduce the amount of insurance you may need . Providing information about your assets is optional.

Death cover

• Funeral costs – As part of calculating your death cover estimate, we consider the amount that may be required to cover general funeral expenses.
• Living expenses – As part of calculating your death cover estimate, we consider the funds required to cover your family's ongoing living expenses such as food, electricity etc.
• Children's education – if you have an income, as part of calculating your death cover estimate, we consider whether you have dependants, as you may want to allow for the amount of insurance to be put towards the cost of their education expenses.

TPD cover

• Medical needs and disability expenses - As part of calculating your TPD cover estimate, we consider whether the insurance cover estimated allows you to have funds available to pay for modifications to your house, purchase medical equipment or pay for health care.

TPD and income protection cover

• Income – As part of calculating your TPD or income protection cover estimate, we consider your income to provide an estimate for insurance cover which could replace some or all of your income to allow you to continue to pay your living expenses and debts if you are unable to work due to illness or injury.

Default assumptions

This calculator is based on a range of default assumptions that are considered to be reasonable and fair, for the reasons set out below. These default assumptions are used unless you choose to provide us with information which is more relevant to your needs or circumstances. You can alter the default assumptions at any time by clicking on the Edit assumptions link available on every page in the calculator.

Living Expenses

When estimating death cover needs, the calculator makes provision for the approximate living expenses of your spouse (and minor children if any) in the event of your death. This calculator only considers your individual expenses and the expenses you are responsible for. When entering expenses you need to consider whether you need to replace your entire family units’ expenses or whether you only want your part of the expenses covered.

Education costs

The default allowance used by the calculator for education expenses is $2,300 per annum per child. This is considered reasonable because it is based on the Australian Bureau of Statistics (ABS) Household Expenditure Survey 2015-16, available at www.abs.gov.au, and factors in changes to these figures due to inflation, up to December 2020.

The estimate represents the average cost for both primary and secondary education, assumed to be payable from age 5 to 18 by default. You can change the amount of education expenses you would like the calculator to use at any time in the calculator field Annual education costs.

Funeral expenses

By default, the calculator assumes funeral costs upon death of $5,000. This is considered reasonable because it is consistent with Australian Securities & Investment Commission’s (ASIC) ‘Report 292: Paying for funerals: How consumers decide to meet the cost (July 2012)’. The report states, as a rule of thumb, funerals either cost $5,000, $10,000 or $15,000. The default immediate expense for death cover is based on the $5,000 amount, however, your expenses may vary based on the type of funeral you would like. You can change this amount of funeral expenses you would like the calculator to use at any time in the field Funeral expenses.

Medical needs and disability expenses

The default immediate expense for TPD insurance used by the calculator is $273,000. This is considered reasonable because it is based on research conducted by Cancer NSW in 2007, and factors in changes to this figure due to inflation, up to December 2020’. This default figure is to provide cover for expenses related to your disability such as modifications to your house or car or for medical equipment etc. You can change the amount of medical needs and disability expenses you would like the calculator to use at any time under the field Cost of disability in the calculator.

Trauma

The trauma cover default amount used in the calculator is $150,000, which has been calculated based on the three trauma events most likely to occur and taking the highest claim amount of all three, which is the event of stroke at $150,000. If the calculated cover amount for Life and TPD totals more than $1,000,000, 15% of the sum insured for Life/TPD will be used as the trauma cover amount instead, to account for potential shortfalls in income. For example, if the calculated cover amount for Life and TPD is $1.5m, $225,000 of Trauma cover amount will be delivered by the calculator. Costs for the most likely trauma events are:

Event	Individual Lifetime cost	Source	Notes
Heart Attack	$20,000	Australian Institute of Health and Welfare publication Health System Costs of Cardiovascular Disease in Australia 1993- 94	Figure has been adjusted to account for inflation
Cancer	$120,000	i. Australian Institute of Health & Welfare, Health System Expenditures on Cancer in Australia 2000 — 2001, Published May 2005. ii. Optimising Cancer Care in Australia, National Cancer Control Initiative, February 2003. iii. Access Economics — Cost of Cancer in NSW, April 2007).	Figure has been adjusted to account for inflation
Stroke	$150,000	Lifetime costs of stroke subtypes in Australia, Melbourne, June 2003.	Figure has been adjusted to account for inflation

 

Income protection

The income protection percentage default is set to 70% of income plus super. This is considered reasonable because it is the proposed maximum income protection level for any benefit period beyond 6 months, mandated by the Australian Prudential Regulation Authority (APRA). For the first 6 months of the benefit period, a maximum of 90% of your income can be replaced but this has not been used as a default assumption in the calculator. You can find more information about this requirement here. APRA will compel life companies to adhere to this standard from 1 October 2021.

You can edit the income protection percentage by clicking on the Edit assumptions link available in the calculator.

TPD replacement of income

We assume that in the event of permanent disability 100% of your income plus super will be replaced through a combination of income protection and TPD insurance. Income protection insurance will be used to replace up to 70% of income and the remainder will be covered by the TPD insurance. This income replacement rate is considered reasonable as this allows for living expenses and debts to continue to be covered.

Your mortgage and other debts

By default, the calculator does not include any debts or liabilities you have and whether the level of insurance is sufficient to repay those debts and liabilities. This is considered reasonable because each individual’s mortgage and debt levels will depend on their particular circumstances and so it is not possible to make general assumptions about debt levels. Consider what you would like to see happen to your outstanding mortgage and other debts in the event of your death. Any mortgages or debts that you wish to be repaid can be added in the Your home and Your debt sections in the calculator.

If you do not provide this information, the calculator will use a default debt figure of zero (0).

Your assets

In assessing your insurance needs, the calculator does not consider the available assets you or your family may be prepared to sell to reduce your debt and meet future expenses. This is considered reasonable as the decision whether to sell an asset to repay debt will depend on the particular circumstances and so it is not possible to make general assumptions about this. You can provide an estimated value of your assets if you would like the calculator to consider this information. Note that the impact of any assets on your insurance estimate would be impacted by any debts or liabilities you may have.

If you do not provide any information about your assets, the calculator will use a default figure of zero (0).

Tax and Social Security

The calculator doesn’t take into account any social security benefits, or tax that may be payable on insurance benefits received by your dependants, or on investments being sold to fund an insurance event.

The calculator only takes into account income tax that may be payable on the income protection insurance and in calculating the level of future income needed from the TPD insurance.

This is reasonable because any tax that may be payable by you and social security benefits that may be received will depend on your individual circumstances, including the source of any insured benefits and how investments are held. You may wish to get advice from a licensed financial adviser.

Discount rate

The calculator allows for cashflows such as expenses which will be incurred in the future. These future cashflows are expressed in present values using a default discount rate of 2.5%. This is based on ASIC Corporations (Generic Calculators) Instrument 2016/207 (Instrument).

Inflation rate and Wage inflation rate

The calculator assumes an inflation rate of 2.5% pa which is reasonable given it is set out in the Instrument. The calculator also adopts a wage inflation rate and assumes a wage inflation rate of 4% pa. This is considered reasonable given it is the long-term forecast of nominal wage growth in the Government’s 2021 Intergenerational Report. The actual rates of inflation and wage inflation may differ significantly from these assumptions. If inflation and wage inflation is more or less than the assumed rates, the outcome at the end of the selected period could be affected.

Limitations

For the purposes of calculating the total estimated level of insurance cover, existing cover is not considered.

Furthermore, the following ranges and limitations have been adopted:

• Age must be in the range 18-59 inclusive.
• The maximum number of children is limited to 5.
• Age of children must be between 0 and 18 years (inclusive).
• Your current home mortgage is limited to a maximum of $5,000,000.
• Your rent per week is limited to a maximum of $2,000.
• Your current debt is limited to a maximum of $5,000,000.
• Your current salary before tax is limited to a maximum of $250,000 per annum.
• Your current savings are limited to a maximum of $5,000,000.
• Your current assets are limited to a maximum of $5,000,000 per asset.
• Your average living expenses per month are limited to a maximum of $50,000.
• Your dependents’ average educations costs are limited to a maximum of $50,000 per annum.
• Cost of disability is limited to a maximum of $1,000,000.
• Funeral costs are limited to a maximum of $50,000.