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Insurance Advice

Personal insurance protects the thing every financial plan depends on — your ability to earn. This guide covers the four main covers, how to work out how much you need, whether to hold it inside or outside super, how premiums and tax work, then lets you model your own cover gap.

Check my cover gap ↓ Learn the framework
General advice only. This information and the calculators below are educational and do not take into account your personal objectives, financial situation or needs. Cover, premiums, definitions and tax treatment vary by policy — always check the PDS and speak with a licensed financial adviser.
The advice framework

The eight building blocks of insurance advice.

These are the same areas a professional adviser works through when giving insurance advice — explained here in plain English.

Follow the path from framing the risk through to structuring and taxing your cover. Tap any block to explore it and see how it connects.

01 · The process
Managing risk

Insurance is one way to treat risk. The risk management process is: identify what could go wrong, assess how likely and how severe, then decide whether to avoid, reduce, retain or transfer it. Insurance transfers the financial impact of events you can't afford to self-fund.

02 · Life cover
Life (death) insurance

Pays a lump sum to your beneficiaries if you die (or are diagnosed as terminally ill). It's used to clear debts, replace your income and provide for dependants. The cornerstone cover where others rely on your earnings.

03 · TPD
Total & permanent disability

Pays a lump sum if illness or injury permanently stops you working. Definitions matter: "own occupation" (can't do your job) pays more readily than "any occupation" (can't do any suited job). Used to clear debt and fund future care.

04 · Trauma
Trauma / critical illness

Pays a lump sum on diagnosis of a major condition — cancer, heart attack, stroke and others — regardless of whether you can work. It buys breathing room: time off, treatment costs, or reducing debt while you recover.

05 · Income protection
Income protection (IP)

Replaces up to 70% of your income (a monthly benefit) if you can't work due to illness or injury. Shaped by a waiting period (before payments start) and a benefit period (how long they last) — often to age 65.

06 · Sizing cover
How much you need

A needs analysis adds up what your family would need — clear debts, replace income, fund education and final expenses — then subtracts existing assets and cover. What's left is your cover gap. Model yours in the dashboard below.

07 · Ownership
Inside vs outside super

Cover can be held personally or through your super fund. Inside super preserves cash flow and may be cheaper, but can erode your balance, has restrictions (e.g. own-occupation TPD), and benefits can be taxed differently. Ownership structure is a key advice decision.

08 · Tax & premiums
Premiums & taxation

IP premiums are generally tax-deductible; life/TPD/trauma premiums usually aren't. Premiums can be stepped (rise with age) or level (flat but higher early). Benefit taxation depends on cover type, ownership and who receives it.

Interactive dashboard

Work out your cover.

Three calculators that turn the framework into numbers. Drag the sliders — everything updates instantly. All figures are estimates for general guidance only.

What your family would need

What you already have

Estimated cover gap — additional life/TPD cover you may need
—Total estimated need
—Assets + existing cover
Where the need comes from

Your income protection

A longer waiting period lowers your premium but means a bigger gap to self-fund before benefits start. A benefit period to age 65 gives the strongest protection.

Your monthly IP benefit — — · —
Income vs benefit vs expenses
—Before benefits start
—Benefits paid for

Compare premium structures

Stepped (cumulative) Level (cumulative)
Stepped overtakes level at — the crossover point — after this, level is cheaper
—Total stepped cost
—Total level cost

These calculators are simplified models for general education. They make assumptions and exclude many factors relevant to you (your health and occupation, exact policy definitions, indexation, tax position, super-ownership rules and more). Premiums shown are illustrative inputs, not quotes. Before acting, get personal advice from a licensed financial adviser.

In depth

The insurance advice areas, explained.

The four personal covers.

Each protects against a different event. Most households need a combination, weighted to their debts, dependants and stage of life.

  • ✓ Life: lump sum on death or terminal illness — clears debt, replaces income
  • ✓ TPD: lump sum if you can never work again — care costs, debt
  • ✓ Trauma: lump sum on diagnosis of a major illness — recovery breathing room
  • ✓ Income protection: monthly benefit while you can't work — replaces cash flow
What each cover pays
General guide
LifeLump sum to beneficiaries on death
TPDLump sum — own vs any occupation definition
TraumaLump sum on diagnosis — no need to stop work
Income protectionUp to 70% of income, monthly★ Often the most overlooked, yet protects your biggest asset

How much cover do you actually need?

The needs-based method totals what your family would require, then subtracts what you already have. A common shorthand is "DIME": Debts, Income, Mortgage, Education.

  • ✓ Add up debts to clear, income to replace, education and final expenses
  • ✓ Subtract super, savings and any existing cover
  • ✓ The difference is your cover gap
  • ✓ Re-check after big life events — a new child, mortgage, or job change
The needs calculation
Try it above
NeedsDebts + income replacement + education + final expenses
Less resourcesSuper + savings + existing cover
= Cover gapThe amount to insure★ Model your own numbers in the calculator above

Inside or outside super?

Where you hold cover affects cost, cash flow, tax and the definitions available. It's one of the most consequential decisions in insurance advice.

  • ✓ Inside super: premiums paid from your balance — easier cash flow, often cheaper
  • ✗ But it erodes your retirement savings and has restrictions (e.g. limited own-occupation TPD, no trauma)
  • ✓ Outside super: full range of definitions, you control the policy
  • ✗ But premiums come from after-tax cash flow (except deductible IP)
Ownership at a glance
General guide
✓Life & any-occupation TPD work well inside superCommon
!Trauma generally can't be held inside superHold outside
!Premiums inside super reduce your retirement balanceTrade-off
✓IP premiums are tax-deductible either wayTax benefit

Stepped vs level premiums.

How your premium is structured changes what you pay over time — and the right choice depends on how long you'll keep the cover.

  • ✓ Stepped: starts cheaper but rises each year as you age
  • ✓ Level: higher at first but flatter over time (still subject to repricing)
  • ✓ Level tends to win if you hold cover long-term; stepped if short-term
  • ✓ Also weigh agreed value vs indemnity, and indexation of cover
Which is cheaper?
Try it above
SteppedLow early, rises with age
LevelHigher early, flatter — wins if held long-term★ The premium calculator above shows your crossover age
Agreed vs indemnityAgreed locks the benefit; indemnity proves income at claim

How premiums and benefits are taxed.

Tax treatment differs by cover type, ownership and who receives the benefit — a real factor in structuring cover.

  • ✓ Income protection premiums are generally tax-deductible to you
  • ✗ Life, TPD and trauma premiums are generally not deductible (when self-owned)
  • ✓ IP benefits are assessable income (taxed like salary)
  • ✓ Life benefits to a tax dependant are tax-free; TPD inside super can be taxed
Premium & benefit tax
General guide
IP premiumsTax-deductible · benefits taxed as income★ Effectively the government subsidises part of your IP cost
Life / TPD / trauma premiumsGenerally not deductible when self-owned
TPD benefit inside super (under 60)Can include a taxable component

Underwriting & claims.

Getting covered (underwriting) and getting paid (claims) both hinge on full, honest disclosure of your health and circumstances.

  • ✓ Underwriting assesses your health, occupation, pastimes and history
  • ✓ Your duty of disclosure — answer all questions fully and honestly
  • ✗ Non-disclosure can let an insurer reduce or decline a claim
  • ✓ Business cover (buy/sell, key person, business expenses) follows the same principles
Getting it right
General guide
✓Disclose all health & lifestyle facts honestlyCritical
✓Understand the claim definitions before you buyRead the PDS
!Non-disclosure risks your claim being deniedBe thorough
✓Business owners: buy/sell & key person coverSpecialist area
Deep dive Q&A

Your insurance questions, answered.

The questions Australians ask most about personal insurance — answered in plain English.

Need personal advice?

The calculators above are a starting point. For advice on the right cover, definitions and structure for you, speak with a licensed financial adviser.

There's no universal number — it depends on your debts, dependants, income and existing assets. The needs-based approach (try the calculator above) adds up what your family would need to clear debts, replace your income for a number of years, fund children's education and cover final expenses, then subtracts your super, savings and any existing cover. The gap is roughly what you'd insure. A common rule of thumb is 10–12× your annual income, but a proper needs analysis is far more accurate.
Stepped premiums start lower but increase every year as you age, so they can become expensive later in life. Level premiums are higher at the start but stay flatter over time (though insurers can still reprice them). If you expect to hold the cover for a long time — say into your 50s and 60s — level premiums often work out cheaper overall. If you only need cover for a shorter period, stepped is usually cheaper. The premium calculator above shows you the crossover age for your numbers.
Inside super, premiums are paid from your super balance rather than your take-home pay, which helps cash flow and can be cheaper — but it slowly erodes your retirement savings, and some cover (like trauma, or "own occupation" TPD) is restricted or unavailable. Outside super, you get the full range of definitions and control the policy directly, but premiums come from after-tax income (except income protection, which is tax-deductible either way). The right answer depends on your budget, cover needs and retirement plans.
Income protection premiums are generally tax-deductible when the policy is held in your own name, because the benefit replaces assessable income. Life, TPD and trauma premiums are generally not deductible when self-owned. Inside super, the fund may claim deductions, which can change the net cost. The trade-off is that deductible IP benefits are taxed as income when you claim. Always confirm your specific position with a tax professional.
For income protection, the waiting period is how long you must be off work before benefits start — commonly 30, 60 or 90 days. A longer waiting period lowers your premium but means you need savings or sick leave to bridge the gap. The benefit period is how long payments continue once they start — typically 2 years, 5 years, or all the way to age 65. A "to age 65" benefit period gives the strongest protection against a long-term disability, which is where the real financial risk lies.
These are TPD definitions that determine when you can claim. "Own occupation" pays if you can't work in your specific job — a more generous, easier-to-meet definition, but more expensive and not available inside super. "Any occupation" pays only if you can't work in any job you're reasonably suited to by education, training or experience — cheaper, but a higher bar to claim. The definition you choose materially affects both your premium and your likelihood of a successful claim.
Mental health conditions are a common reason for claims, and many policies do cover them, though some apply exclusions or loadings depending on your history. Honest disclosure during underwriting is essential — non-disclosure can jeopardise a future claim. If you're struggling right now, please reach out for support: Lifeline 13 11 14 or Beyond Blue 1300 22 4636, both available 24/7. A financial adviser can also help you find insurers with more favourable mental health terms.
When general isn't enough

Protect what matters most.

The calculators show you the size of the gap. A licensed financial adviser can recommend the right covers, definitions, ownership structure and insurer for your health, budget and family.

Find a licensed adviser on MoneySmart → Explore other topics
Important disclaimer

Please read before you rely on anything here

The information on this website is general in nature only and does not take into account your personal objectives, financial situation, or needs. It is not financial, legal, or taxation advice, and nothing on this site is intended to be relied upon as advice or to create any legally binding obligation or relationship.

While we try to keep the content accurate and current, it may be out of date, incomplete, or incorrect. Rules, rates, contribution caps, and thresholds change frequently — always verify the current figures with the ATO, ASIC's MoneySmart website, or a licensed professional.

All calculators, projections, and figures shown are for illustration and demonstration purposes only. They rely on simplified assumptions, are not predictions, quotes, or guarantees, and your actual outcome will differ.

Before acting on anything you read here, we strongly recommend you seek professional advice from a licensed financial adviser, accountant, or solicitor who can consider your individual circumstances. AdviceGenie does not hold an Australian Financial Services Licence (AFSL) and does not provide financial product advice as defined in the Corporations Act 2001 (Cth).

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