How much Insurance cover do I need?

Life insurance helps to protect you and your family if something happens to take away your earning power.

When setting up your SMSF it’s important to know how much insurance cover you actually need to ensure members have enough. It’s considering things like if you have a mortgage or any other loans, how much you spend on everyday expenses such as groceries, petrol and bills, and your children’s education.

With so much to consider, it can be hard to know how much is enough. To make it easier for you there are insurance needs calculators available online to guide you. The calculators use your personal and financial details to help you work out how much Death, Total and Permanent Disablement (TPD) and Income Protection Insurance you may need.

Here's a case study:

    Sam is 34-years-old and has decided to start an SMSF with his wife Haley. Until now, Sam has relied on the standard insurance cover provided by his industry fund.
    Sam earns $175,000 a year. He and Haley have a savings account, a mortgage on their first house, no investments and reasonably low debt on a credit card and small car loan. The only change Sam has made to his insurance was increasing his Income Protection cover a few years ago when the recession started.
    They have two boys and with the oldest starting school soon, they realise their standard cover may not be sufficient to cover their mortgage, school fees and other debts if anything happened to Sam.

How much cover does Sam's SMSF need?

To get a better understanding of how much cover he needs, Sam uses an assessment.

In the calculator Sam enters his:

    annual income
    number of dependants
    joint assets and debts
    current super balance
    current insurance cover, and
    the age of his youngest child.

The results:

The calculator provides Sam with a comparison of his existing Death, TPD and Income Protection cover and the calculated cover he needs. He’s surprised by the significant gap between his current cover and the amount he needs to provide for his family if something unexpected happens.

The summary shows Sam that when selecting insurance cover for the SMSF, he and Haley need to look at more comprehensive options to protect their family and their lifestyle in the future.

Get a Quote and Apply Online

To obtain an Insurance Quote or to Apply Online with AIA Insurance click here.



AIA Australia Limited (ABN 79 004 837 861 AFSL 230043). Copyright January 2014.

Information is current at the date of this document and may be subject to change. This article provides general information only, without taking into account your personal circumstances. In deciding whether to acquire or continue to hold a financial product you should refer to the relevant Product Disclosure Statement.

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