How Much Life Insurance Cover Should I Compare?

When comparing life insurance, one of the first questions people ask is:

“How much life insurance do I actually need?”

The right amount depends on your debts, income, family situation, existing savings, superannuation and current insurance. But you do not need to guess.

A simple starting point is:

Outstanding debts + income support + future family costs − existing savings, super and current insurance = estimated life insurance need

This is not personal advice, but it gives you a practical way to work out the amount of cover you may want to compare.

Once you have a rough number, the next step is to compare available Life Cover options from a range of Australian insurers.

Life insurance, also called Life Cover or Death Cover, is designed to pay a lump sum if you pass away or, depending on the policy, are diagnosed with a terminal illness.

For many Australians, life insurance is not about leaving a windfall. It is about helping the people who rely on you avoid immediate financial pressure.

Life insurance may help your family:

• pay off the mortgage
• clear personal debts
• replace lost household income
• cover children’s education costs
• meet ongoing living expenses
• avoid selling assets during a difficult time
• maintain financial stability after your death

The question is not simply:

“How much cover do most people have?”

The better question is:

“If I passed away, how much would my family need to stay financially secure?”

There are four main areas to consider before comparing life insurance quotes.

1. Your debts and liabilities

Start with the debts your family may need to clear.

This may include:

• home loan
• investment property loans
• personal loans
• car loans
• credit cards
• business debts
• family loans or guarantees

For many families, the mortgage is the first priority. If the home loan can be cleared, the surviving partner or family may have far more flexibility.

For example:

In this example, the person may want to compare at least $680,000 of Life Cover before considering income replacement or future family costs. 

2. Your income

Next, consider how long your family would need financial support if your income stopped.

Some households may only need a few years of income support. Others, especially families with young children, may want to consider a longer period.

Think about:

• your current income
• whether your partner works
• whether your partner could increase work hours
• your children’s ages
• your household expenses
• how long your family may need support

For example:

This does not mean everyone needs five years of income replacement for your spouse. It simply gives you a way to estimate the amount you may want to compare. 

3. Your children and future family costs

If you have children or other dependants, your life insurance estimate should consider more than today’s bills.

Future costs may include:

• school fees
• university or training costs
• childcare
• medical expenses
• household support
• transport costs
• general living expenses

This is especially important for families with young children, where the surviving parent may need to reduce work hours or take time away from work.

A single person with no dependants may need much less Life Cover than a parent with a mortgage, young children and a partner who relies on their income.

4. Your existing savings, super and insurance

Once you have estimated your debts, income support and future family costs, subtract the resources your family may already have available.

This may include:

• cash savings
• investments
• superannuation balance
• existing insurance inside super
• personally owned insurance
• employer benefits
• other assets your family could access

These amounts may reduce the amount of additional Life Cover you need.

However, be careful. Some assets may not be immediately accessible, may have tax consequences, or may not be intended to fund short-term family needs.

Here is a simple example of how someone might estimate their life insurance need before comparing quotes.

In this example, the person may consider comparing around $1.2 million of Life Cover.

Your number may be higher or lower depending on your family, debts, income, lifestyle and existing assets. 

This is not an exhaustive list of all the items you should consider, however, it does provide a starting point for weighing up 'how much' you would like to insure and provides a simple method/ base to start your calculation. You should build on this and use the things that are important to you.

Not sure what cover amount to compare? Start with a quote and review the available options.

For many families, yes.

The family home is usually the largest debt and one of the most important assets. If the mortgage can be cleared, your family may have more flexibility and less pressure.

Clearing the mortgage may help your partner or family:

• stay in the family home
• reduce work hours if needed
• avoid selling the home quickly
• use income for living expenses instead of loan repayments
• manage the transition after your death

That is why many Australians use the mortgage balance as the starting point when comparing Life Cover.

In many cases, yes.

If your family relies on your income, your Life Cover amount should usually consider some level of income replacement.

This does not necessarily mean replacing your income forever. It may mean providing enough money to support your family through a transition period.

For example:

The right timeframe depends on how long your family would realistically need support.

Many Australians already have life insurance through their superannuation fund.

This can be convenient because premiums may be paid from your super balance rather than your personal cash flow. But it is still worth reviewing carefully.

Life insurance through super may:

• reduce your retirement savings over time
• provide default cover that may not match your actual needs
• have different policy definitions and conditions
• change if you change super funds
• require careful beneficiary planning

For some people, cover through super may be appropriate. For others, personally owned cover or a combination of super and personal ownership may be more suitable.

The key is to compare the amount, cost, ownership structure and policy terms before deciding.

1. Relying only on default super cover

Default insurance inside super can be useful, but it may not be enough for your family’s actual needs.

If you have a mortgage, children, business debts or dependants, it is worth checking whether your existing cover is enough.

Some default cover may also reduce as you age, meaning the amount available to your family could decline over time.

2. Guessing the amount of cover

Many people choose a round number such as $500,000 or $1 million without properly calculating their needs.

A better approach is to estimate:

debts + income support + future costs − existing assets and cover

This gives you a clearer starting point before comparing quotes.

3. Forgetting future expenses

Life insurance is not only about today’s bills.

If you have children, you may also want to consider education costs, childcare, household support and future family expenses.

4. Not reviewing your cover

Your insurance needs change over time.

You may need to review your Life Cover when you:

• buy a home
• have children
• start or sell a business
• take on new debt
• change jobs
• increase or reduce your income
• get married or divorced
• pay down your mortgage
• approach retirement

The cover amount that suited you five years ago may not be right today.

5. Choosing only on price

Price matters, but the cheapest policy is not always the most appropriate.

When comparing Life Cover, you may also want to consider:

• insurer
• premium structure
• policy definitions
• ownership options
• exclusions
• underwriting requirements
• whether cover is held personally or through super

The goal is not simply to find the cheapest policy. The goal is to compare options that fit your needs.

Quick life insurance cover checklist

Before comparing Life Cover, ask yourself:

• How much debt would need to be repaid?
• How many years of income would my family need?
• What future costs should be covered?
• Do I have children or other dependants?
• What savings, super or existing insurance do I already have?
• Would my partner need to reduce work?
• Would my family be able to stay in the home?
• Is my cover held personally, through super or both?
• When did I last review my insurance?

If you cannot answer these clearly, it may be worth comparing your options.

Frequently Asked Questions

How much life insurance do I need if I have a mortgage?

A common starting point is enough Life Cover to clear the mortgage, plus additional cover for income support, family expenses and other debts.

For example, if your mortgage is $600,000, you may start with that amount and then add several years of income support and future family costs.

Do I need life insurance if I am single?

You may need less Life Cover if you are single with no dependants. However, you may still want to consider debts, family obligations, business commitments, funeral costs or estate planning needs.

Is life insurance through super enough?

Sometimes, but it depends on your situation. Default cover through super may not match your actual debts, income, family needs or preferred ownership structure.

It is worth comparing your existing cover against what your family may actually need.

Can I have too much life insurance?

Yes. It is possible to be overinsured.

The goal is to hold an appropriate level of cover based on your needs, not simply the highest amount available.

Should life insurance cover children’s education?

Many parents include future education costs when estimating Life Cover. This can help reduce the risk that children’s schooling or future study plans are disrupted if something happens to a parent.

When should I reduce my life insurance?

You may consider reducing cover as debts decrease, children become financially independent, assets grow or retirement approaches.

This should be reviewed carefully before changing or cancelling cover.

Ready to compare life insurance options?

Once you have a rough estimate of how much Life Cover you may need, the next step is to compare your options.

Different insurers may offer different premiums, ownership options, underwriting requirements and policy features.

JIC Insurance can help you compare Life Cover options from a range of leading Australian insurers, with support available if you need help understanding your options.

Alex Jorgensen is the Founder of Jorgensen Investment Company, with over 10 years of experience in financial services. Through JIC Insurance, Alex leads a team who help Australians compare life insurance options and make more confident decisions about protecting their family, income and financial future.