This calculator is designed to provide an estimate of potential expenses that life, TPD (Total and Permanent Disablement), trauma, and income protection insurance can help you cover.

Important Notes

1. Fixed Calculation Use: The calculation uses a predetermined algorithm and relies on a limited number of inputs, which are detailed in this document. It does not account for all personal circumstances and should not be the sole factor in determining your insurance needs.
2. Outputs are Estimates Only: The outputs generated by this calculator are estimates based on the assumptions outlined. They should not be solely relied upon for making financial product decisions. These outputs are not recommendations for suitable insurance coverage.
3. Seek Professional Advice: If you need assistance, it is important to seek advice from a qualified financial adviser who can provide advice tailored to your individual circumstances. Always refer to the Product Disclosure Statement (PDS) to ensure the product meets your needs.
4. Regular Review of Coverage: If you purchase life insurance, regularly review your coverage, especially when significant life changes occur, such as income changes, family growth, buying a new home, or marriage, to ensure your insurance remains adequate.

By following these guidelines, you can make informed decisions regarding your insurance needs, ensuring they remain relevant and appropriate to your situation.

1. Income Protection Insurance

1.1 What is income protection insurance?

Income protection insurance provides you with monthly payments if you’re unable to work due to sickness or injury.

By maintaining household income whilst you are unable to work, income protection helps your family meet financial expenses such as bills, mortgage repayments and living expenses.

1.2 Income Protection calculation methodology

The estimate of income protection monthly benefit that will be used is: Annual Insurable Income x 70% ÷ 12, capped at $20,000 per month.

1.3 Replacement Ratio – Income

The calculator assumes that you wish to cover the maximum amount of your income, which is typically 70% for most income protection products available in Australia. This is a reasonable assumption since, despite the loss of income from work, your regular expenses, such as mortgage repayments, groceries, and bills, will likely remain the same. However, you can adjust this assumption to calculate a lower proportion of your monthly income if desired.

1.4 Limit of $20,000 per month

The calculator limits the maximum income protection monthly benefit at $20,000 per month or your first $342,857pa of insurable income. In general, beyond this amount insurers may agree to cover a further proportion of your income, however this could be at a replacement ratio lower than 70% for any income after your first $342,857. Each insurer has a different ratio, so please consult your broker or insurer to understand the maximum benefit insurable.

2. Life Cover and Total and Permanent Disability (TPD) Cover

2.1 What is Life Cover?

Life Cover provides you or beneficiaries with a lump sum benefit if you pass or are terminally ill (this means you are unlikely to live for another 12-24 months). Life insurance can be used to help to pay off debt, ensure there are sufficient funds for a funeral and provide funds for raising children.

2.2 What is Total and Permanent Disability (TPD) Cover?

TPD Cover provides you with a lump sum if you become ill or injured to the extent that you are unlikely to ever be able to work again. TPD can be used to help pay medical, care and home modification costs that may arise following severe disablement, supplement lost income and assist with living expenses, and pay off debts like mortgages.

2.3 Formula

When calculating Life and TPD cover amounts, the following method is used:
Estimate of Life & TPD cover = Outstanding mortgage

• other debts
• School Fees of Children
• $10,000 for funeral and/or other immediate out-of-pocket costs

2.4 Your mortgage

Your mortgage: The calculator assumes that you would like to ensure there is no mortgage burden left if you were to pass or if you were unable to work again, which is reasonable as life insurance is commonly used to discharge debt. The calculator adds the outstanding mortgage amount you input to increase the Life and TPD cover amounts. You can change the amount used in the calculation by changing the amount input.

2.5 Your debts

Your other debts: The calculator asks you which other debts you would like to unburden you or your family with if you were to pass or if you were unable to work again. The calculator adds the outstanding other debt amount you input to increase the Life and TPD cover amounts.

2.7 School Fee of Children

School Fees of Children: The information used to calculate the School Fees of Children are described below. Your input value is added to increase the Life and TPD cover amounts.

Step 1: Select the number of children you have.

Step 2: Input the Sum of future school fees or education expenses per child that you would like to ensure there is funding for if you were to pass away or are unable to work again.

Sum Insured that will be added to your Life/TPD estimate amounts = Number of Children x Fees per Child.

2.8 Funeral or other immediate out of pocket costs

According to the governments MoneySmart website (reference 1) ‘Funerals can cost from $4,000 for a basic cremation to around $15,000 for a more elaborate burial.’This calculator will assume you will want a sum of somewhere between these two ranges to account for funeral expenses.

This amount is $10,000. This is reasonable as not everyone may want a basic cremation nor an elaborate burial.

You can nominate your own sums if you do not feel like this matches your wishes.

3. Trauma

3.1 What is trauma cover?

Trauma cover, also known as Critical Illness insurance, provides a lump sum payment if you are diagnosed with a condition or suffer an injury specified in your policy. For the payment to be made, your condition must meet the required severity, and you may need to survive for a minimum period, which is typically two weeks. This cover helps pay for out-of-pocket medical and care expenses, offering financial peace of mind so you can focus on recovering from your illness or injury.

3.2 Formula

$95,000 + ‘Other Debts’ from 2.6.

3.3 Out of pocket costs of your medical care

When you suffer from a critical illness or injury, you may face out-of-pocket expenses for medical treatment, hospital stays, surgical procedures, specialist appointments, medicines, and ongoing care. The calculator takes this into account and helps you to estimate an amount you may wish to have to meet expenses.

The amount used in the calculator is $95,000.

This has been calculated based on research in the 2024 Zurich Health Research Whitepaper "The cost of care volume 2" where the lifetime out-of-pocket expenses for a heart attack were calculated at $95,728 (reference 2). This is reasonable as heart attacks are one of the most common causes of claim. According to the Australian Institute of Health and Welfare (reference 3), in 2020, there were 56,700 acute coronary events in Australia for people age 25 and over.

https://www.aihw.gov.au/reports/heart-stroke-vascular-diseases/hsvd-facts/contents/all-heart-stroke-and-vascular-disease/coronary-heart-disease

3.4 Paying back debt you wish

When you suffer from a critical illness or injury, you may need to take extended time off work for medical appointments and recovery. Your partner might also stop working to care for you. This can affect your household income, especially if sick leave, carer’s leave, and income protection insurance are insufficient or run out. The calculator takes this into account and assumes you want to pay off at least your non-mortgage debt to help lessen the financial burden. This is used as non-mortgage debt is typically shorter term and can have higher interest rates and hence a higher cashflow burden relative to amount borrowed as compared to your mortgage.

References

Reference 1 – MoneySmart, ‘Paying for your funeral’.
Available at: https://moneysmart.gov.au/living-in-retirement/paying-for-your-funeral
[Accessed on 29th July 2024]

Reference 2 – Data has been sourced from Zurich Health Research Whitepaper “The cost of care” Available at: https://advisers.zurich.com.au/resources/thought-leadership/cost-of-care.html?utm_source=sfmc&utm_medium=email&utm_campaign=Launch_Adviser_Coc2_June202 4&utm_term=https%3a%2f%2fadvisers.zurich.com.au%2fresources%2fthought-leadership%2fcost-of-care.html&utm_id=387801&sfmc_id=115103368
[Accessed on 29th July 2024]

Reference 3 – Australian Institute of Health and Welfare
Available at: https://www.aihw.gov.au/reports/heart-stroke-vascular-diseases/hsvd-facts/contents/all-heart-stroke-and-vascular-disease/coronary-heart-disease
[Accessed on 29th July 2024]

Limitations

The calculator does not guarantee that you are eligible for the insurance policies which are being estimated. All products brokered through We Life Insure Pty Ltd require you to complete an application. Your application is underwritten and cover may be offered.

The calculator uses a fixed calculation to provide estimates. It does not ask for all the information that may be relevant for you to make a decision and should not be solely relied upon to calculate your desired levels of cover. Personal, legislative and economic circumstances do change so it is important to review your cover regularly.

Disclaimer

Outputs provided by this calculator are estimates of potential financial expenses only and are based on the limited information that you input into the calculator, and the assumptions and methodology set out in the link above. The calculation is subject to several limitations, and the estimates generated do not take into account all of the circumstances that may be relevant to determining a suitable amount of cover for the insurance types described. The calculations are not intended to be relied on for the purposes of making a decision in relation to a financial product and they are not a recommendation that the output is a suitable or sufficient amount of insurance for you.

Any advice provided in connection with life, TPD, trauma or income insurance is general advice only and does not take into account your individual needs, objectives or financial situation. Before you make a decision, consider whether the advice is appropriate for you, having regard to those matters, and always read the relevant Product Disclosure Statement. Decisions should not be made solely in reliance on the results produced by the calculator.

We Life Insure Pty Ltd have used reasonable endeavours to ensure that the assumptions applied by the calculator are reasonable and clearly explained, but do not guarantee that the assumptions and data used by the calculator are or will remain current. To the extent permissible by law, the We Life Insure disclaims any liability and responsibility to any person who relies upon anything done or not done by the calculator, or for any loss arising from reliance on this calculator. However, nothing in this limitation of liability should be read as derogating from any of your rights under law which cannot be excluded.