Life insurance calculator

Limitations

• The information and results provided by this calculator takes into account information you enter but does not consider your personal circumstances, including your current lifestyle expenses, other financial commitments or other needs and objectives. When making any financial decision you should take into account your financial situation, needs and objectives.
• This calculator estimates your life insurance needs based on the limited information that you provide and assumptions made about the future. It does not consider your overall insurance needs, including for temporary or permanent disability, trauma, private health, or long-term income protection cover.
• The calculator estimates the amount of cover needed to provide a lump sum, ongoing income support, or a combination both, that is enough to meet the financial needs and maintain the living standards for your family in the event of your death. The calculator does not consider your eligibility for insured cover or the affordability of the estimated insurance cover.
• Estimates generated by the calculator are based on assumptions (default assumptions or assumptions as modified by you). These may not be accurate in the future if your personal circumstances or legislation changes.
• The calculator is not a substitute for financial advice and should not be relied on for making decisions about a particular financial product or class of financial product. Consider getting advice from a licensed financial adviser who can develop a financial plan tailored to your needs and objectives.
• We recommend you do a new calculation regularly as your circumstances, financial markets, tax and other rules can change.

Default assumptions

The calculator is not intended to recommend a financial product or an interest in a financial product. However, the issuer of this calculator believes that the default assumptions are reasonable, as outlined in the sections below.

You can alter the default inputs and settings throughout the calculator.

Any alteration or input you provide will apply for the whole of the calculation period. Be aware that even small changes to assumptions can make a big difference to the results.

Calculation methodology

This calculator considers your life insurance needs, in the event of your death, across the following areas:

• Funeral costs - covers immediate expenses such as the cost of your funeral.
• Mortgage - having enough insurance to pay off your mortgage. Also consider whether your surviving dependents would sell or downsize your home.
• Other debts - an amount sufficient to pay off your other debts (e.g. other loans, credit card debts, etc)
• Children's education - if you have dependent children you may want to allow for the cost of education expenses.
• Help with your family's living costs - you may wish to include an amount to cover, or contribute to, your family's ongoing living expenses.

Your calculated insurance needs are offset by any available assets that can be used to fund immediate or ongoing costs.

Your funeral costs

By default, the calculator assumes funeral costs upon death of $5,000. You can change this amount in 'Your funeral costs' to reflect your expected funeral costs. Your immediate financial needs in the event of your death will depend on your personal circumstances, however as a default $5,000 is expected to be a reasonable estimate for funeral costs.

Your mortgage

By default, the calculator does not include any mortgage repayment or assets released from the sale of your home. Consider your outstanding mortgage debts and your family's plans regarding your home in the event of your death. Any mortgages you wish to be repaid less any sale proceeds of your home can be added in 'Your mortgage'.

Your other debts

By default, the calculator does not include any debt repayment. Consider your outstanding debts and which ones you would like to include in the assessment of your insurance needs. Any debts you wish to include can be added in 'Your other debts'.

Your children's education expenses

By default, the calculator does not include any funding for you children's education expenses, assumed to be payable from age 5 to 18. This can be added in 'Your children's education expenses' for each child.

The calculator assumes costs entered will increase each year with the inflation rate assumption found in 'Results'. By default, the calculator uses an inflation rate of 2.5% pa, which MoneySmart believes to be reasonable under current economic conditions. You can change this figure in 'Results'.

The calculator determines the present value of future costs by assuming the insured amount is invested and earns a return (net of tax and expenses) equal to the interest rate found in 'Results'. By default, the calculator uses an interest rate of 3.0% pa. You can change this in 'Results'.

Help with your family's living cost

By default, the calculator does not include an amount for ongoing living costs. You can enter an amount to cover up to 10 years of ongoing living costs in 'Help with your family's living cost'.

If you have elected to clear any outstanding debts in the event of your death, consider the impact this may have on your family's ongoing living expenses. Also consider any other sources of income your family will receive that can be used to meet their ongoing living expenses.

The calculator assumes costs entered will increase each year with the inflation rate found in 'Results'. By default, the calculator uses an inflation rate of 2.5% pa, which MoneySmart believes to be reasonable under current economic conditions. You can change this figure in 'Results'.

The calculator determines the present value of these costs assuming the insured amount is invested and earns returns (net of tax and expenses) equal to the investment rate of return found in 'Results'. By default, the calculator uses an investment return of 3.0% pa. MoneySmart acknowledge that the return earned on the funds received from your insurance will be highly dependent on your personal circumstances and the prevailing economic conditions.You also have the ability to change the investment rate of return in 'Results'.

Your assets

In assessing your life insurance needs, the calculator considers the available assets you or your family may have to offset these needs. By default, the calculator does not include any assets. You can make changes to these assets in 'Your assets' which consists of:

• Superannuation
• Savings
• Investment property
• Other investments
• Other assets

Insurance cover need

The overall life insurance cover shown in the calculator is the total of immediate financial needs (funeral expenses, outstanding mortgage and debts to be paid) plus the present value of any ongoing living costs (education expenses, ongoing living expenses) less available assets you have, to fund your family's financial needs in the event of your death.

Tax

The calculator does not take into account any tax that may be payable on insurance benefits received by you or your beneficiaries. Any tax that may be payable will depend on the circumstances of the payment and the source of any insured benefits. You may wish to get advice from a licensed financial adviser.