How much should you budget for life insurance?
New Finder research reveals a $600* swing between the least and most expensive life insurance plans.
Financial planner Brenton Tong tells Finder: "You can easily find up to 50% variation in premium costs when you go from one insurance company to another."
And it's not just choosing a pricey provider that can hit you in the pocket.
Comparing life insurance can get very tricky, as there are so many factors affecting the cost of cover.
These include:
- Your age
- Gender
- Medical history
- Your job
- Whether or not you smoke.
The cover amount – put bluntly, how much your family gets if you die – has a major influence too.
It's probably the most important thing of all to get right.
Working out how much cover you need
Gary Ross Hunter, life insurance expert at Finder, said it's best to start by getting the pen and paper out.
"Jot down your monthly take-home pay (after tax)."
"Cut out any personal expenses or bills that wouldn't be payable if you were to die – for example, your gym membership."
Hunter added: "The difference is basically how much your family relies on your wage."
"Multiply it by 12 to get a yearly figure. Then, multiply this by the number of years you'd want to support your family if you weren't around."
"That number can be a general guide for your lump sum."
Factoring in the mortgage
Brenton Tong, CEO of Financial Spectrum, told Finder: "For life insurance, as a general guide you want at least the total of your home mortgage and, if you have children, 5–10 times your salary.
Tong added: "The age of your children will matter because if they're just about to move out of home, you don't have as much time you need to look after them if a parent dies suddenly."
Finder's life insurance calculator can also help you to figure out what you'd need to help pay down your debts and meet ongoing expenses such as groceries and petrol. Or, check out Finder's top life insurance picks for May.
*Source - Figures are based on a 40-year-old non-smoker living in NSW, applying for $500,000 of cover. Taken from Finder's 2023 Life Insurance Awards research, which analysed 10 direct life insurance policies.
