How much life insurance do I need? Beyond the multiple-of-salary rule
The common rule is 10 to 12 times your annual income. It's a rough guide, and it misses the things that move the answer most: your mortgage, whether your partner works, how old your children are, and what you already have in super and savings. For one sample family it gives $850,000. A year-by-year calculation gives $1.13 million.
A multiple of your salary is easy to remember, which is its only real advantage. The better approach adds up what your family would need and subtracts what they'd already have.
What a proper calculation counts
Paid straight away: the mortgage and other debts, funeral and estate costs.
Paid over time: your children's living, school and childcare costs until they're independent, and the income your partner would lose, covering their living costs until they can retire. The calculator works year by year, adding the Age Pension from pension age, and tax on any investment income.
Taken off: savings, investments, and your super, which is paid to your family on death, usually tax-free to a spouse and dependent children.
The result is the smallest lump sum that doesn't run out before the household reaches the end of the plan.
A worked example
Take someone aged 35 on $85,000. Their partner earns $60,000. They have two children aged 3 and 6, a home worth $900,000 with a $550,000 mortgage, $15,000 of other debts, $20,000 in savings and a $5,000 super balance. The calculator gives:
- Death cover: about $1.13 million. About $580,000 pays the mortgage, debts and funeral. Another $570,000 is invested to cover the children's costs and the survivors' living costs, less the $25,000 already there.
- TPD cover: about $875,000, if they also hold income protection to age 65. With no income protection it's $1.48 million.
The 10-times rule would suggest $850,000.
What changes the answer
We changed one thing at a time on the same household.
| Change | Death cover needed |
|---|---|
| As above | $1.13 million |
| No mortgage | $576,000 |
| Mortgage of $300,000 instead of $550,000 | $876,000 |
| $120,000 in super instead of $5,000 | $1.01 million |
| Partner earning nothing | $2.57 million |
The mortgage and the partner's income each move the answer by far more than the salary does. A rule based on your wage can't see either.
TPD usually needs more than Death
TPD pays you, and you're still alive and still need to eat. After a disability the household loses your income and takes on care costs, so TPD often needs to be bigger than Death for the same family, unless income protection is in place. That's why income protection and TPD are best decided together.
What the defaults give
Automatic cover at most funds is a fraction of the sample family's figure. At 35, the thirteen funds we compared in our cost article give between about $140,000 and $476,000 of Death cover. If you have a mortgage and children, that's probably a starting point, not the answer.
What this can't do
It's a model, not advice. It makes assumptions, such as a 4% withdrawal rate, 2026-27 tax rates, a conservative return, and the Age Pension rules, and every one is shown and can be changed. It doesn't account for family tax benefits, a disability support pension, or capital gains tax. For decisions involving large amounts or a complicated family, speak to a licensed adviser.
Sources
- Calculations: miadvice needs analysis, 2026-27 tax and Age Pension rates (Services Australia rates from 20 September 2026)
- ASFA Retirement Standard, June quarter 2026 (retirement living costs)
- Multiple-of-salary rule of thumb: widely quoted by insurers and fund guides; not a regulatory standard
Work it out for your household
Free, no sign-up. Uses each fund's published rates and rules.
General information only, not personal advice. Fund rules and premiums change, usually on 1 July or 1 October. Check the fund's current insurance guide before relying on a figure here.