Insurance Needs Calculator | Merlin Wealth Protection

Insurance Needs Calculator

Merlin Risk Wiz. Calculators & Tools

Protecting what matters most

Get a clearer picture of your insurance needs by answering just 5 easy questions.

Have you ever stopped to think: If your income stopped tomorrow due to illness, injury, or worse, how long could your family maintain their current lifestyle?

Our straightforward Insurance Needs Calculator helps you explore and estimate your potential insurance needs with greater confidence.

Calculator Purpose, Methodology & Assumptions and Disclaimer

Calculator Purpose

This calculator provides an indicative estimate of potential financial needs that life insurance, total and permanent disablement (TPD) cover, trauma (critical illness) cover, and income protection insurance may help address. It draws on a simplified version of our insurance philosophy, which prioritises income replacement as the cornerstone of family financial security, while also accounting for debt reduction, out-of-pocket medical costs, and final expenses.

It’s not advice. It’s a starting point — a way to see numbers that reflect your inputs and realistic assumptions.

How much monthly income protection could help replace lost earnings
A potential lump sum for life cover to support dependents, clear debts, and cover final expenses
An estimate for TPD to help if you could never work again
A trauma cover figure to bridge recovery costs after a serious diagnosis

All figures are illustrative only — they depend on the information you provide and the assumptions listed below. They do not replace personalised advice.

Important Information

Insurance products vary substantially across insurers in key areas: policy definitions (e.g., "own occupation", "any occupation", or "activities of daily living" for TPD), covered events and exclusions, waiting periods (typically 30–90 days for income protection), benefit periods (2 years, 5 years, to age 65), premium structures (variable vs age-stepped), and indexation mechanisms. No two policies are the same, and acceptance, terms, and premiums depend on age, occupation category, medical history, lifestyle factors (smoking, hazardous activities), and financial underwriting.

The estimates generated are not designed to guide or influence decisions to purchase, increase, reduce, or cancel insurance cover. No reliance should be placed on these outputs for any financial decision.

Before considering any insurance product, assess its suitability against your specific financial circumstances, objectives, and needs. This includes evaluating:

Ongoing premium affordability over the intended policy term
Potential erosion of retirement savings if premiums divert funds from super contributions or other investments
Flexibility to adjust or cease cover (subject to policy conditions and potential loss of insurability)

Personal advice from a licensed financial adviser like us, is essential prior to any action. You must read the Product Disclosure Statement (PDS), Target Market Determination, and all associated disclosure documents issued by the insurer.
Regularly review insurance arrangements — at minimum annually and immediately following material life changes such as marriage, birth of children, divorce, significant income increase/decrease, property acquisition, business ownership, health diagnosis, or nearing retirement.

How the Calculator Works

The calculator derives estimates by processing user-entered data (current age last birthday, pre-tax annual earned income, desired retirement age, presence of financial dependents, total outstanding debts excluding investment loans, and preferred percentage of debts to be repaid on death or permanent disablement) alongside the fixed and default assumptions described in the Methodology and Assumptions section.

Assumptions mandated by legislation, taxation rules, or regulatory standards remain unchangeable. Selectable assumptions (e.g., inflation rate, investment return), can be adjusted; if left unchanged, the published defaults are applied.

The chosen inputs and default values reflect elements frequently considered in Australian needs-based insurance planning, informed by: ASIC’s MoneySmart guidance, Australian Bureau of Statistics data, Reserve Bank of Australia publications, Cancer Council Australia research, and industry benchmarks.

Methodology and Assumptions

Inflation adjustment

Annual escalation of 3.8% applied to future income needs and expenses. Basis: All Groups Consumer Price Index (CPI), year-ended January 2026. Source: Australian Bureau of Statistics, published via Reserve Bank of Australia. Note: CPI tracks household expenditure changes but may understate personal inflation in areas such as education, healthcare, or housing.

Investment return on lump sums

Net real discount rate of 3.08% per annum (illustrative nominal return 7.0% less 3.8% inflation, after assumed investment fees and taxes). Purpose: Converts future partial income streams into a present-day lump-sum figure, assuming ‘growth’ investment of proceeds. Note: This is an illustrative rate only. Actual portfolio returns depend on asset mix (e.g., cash, bonds, equities), market volatility, management fees (typically 0.5–1.5% pa), taxes, and withdrawal strategy. Higher assumed returns reduce required lump sum; lower returns increase it.

Debt repayment

Your selected percentage of non-investment debts (e.g., home mortgage, personal loans, credit cards) added to cover requirements on death or permanent disablement. Rationale: Clearing debt reduces ongoing financial pressure on surviving family or the insured person. Investment loans are excluded as they often serve income-producing purposes.

Out-of-pocket medical and recovery costs (TPD and Trauma)

$50,000 illustrative provision for personal expenses including specialist consultations, gap fees, non-Medicare-covered treatments, rehabilitation, medications, home or vehicle modifications, and income disruption during recovery. Basis: Conservative estimate for moderate-to-severe cases over approximately 5 years. Supporting data: Cancer Council Australia 2025 national survey (released February 2026) reported 98.8% of people diagnosed with cancer incur out-of-pocket costs, with 38.2% affected by income loss/disruption, 23.7% by surgical expenses, and 23.6% by insurance gaps. Many face $1,000–$10,000+ in early years.

Funeral and estate administration costs (Life cover)

$30,000 illustrative total: $15,000 approximate cost of an attended funeral service plus $15,000 for basic estate administration, legal fees, probate applications, and asset distribution. Basis: MoneySmart.gov.au range ($4,000 basic cremation to $15,000+ elaborate burial); industry data 2023–2025 showing average attended funerals between $8,000–$11,000, with upward pressure from inflation. Note: Actual costs vary widely by location (metropolitan vs regional), cultural preferences, and service complexity.

Tax considerations No explicit tax modelling applied.

Income protection benefits are generally assessable as income and taxed at marginal rates.

Lump-sum payments (life, TPD, trauma) are typically tax-free when paid to dependants or under complying policies, but exceptions exist (e.g., certain TPD structures or non-dependant beneficiaries). Seek specialist advice for optimal ownership (personal vs super) for claims and tax-effective arrangements.

Income Protection

Income protection benefits are generally assessable as income and taxed at marginal rates.

Life Cover

Lump sum benefit equals your specified debt payout percentage plus present value of partial income replacement for dependents (if applicable, over years to retirement) plus $30,000 funeral/estate costs. Policies frequently require life cover to equal or exceed combined TPD plus trauma sums due to reduction-of-sum-insured provisions on linked claims.

Total and Permanent Disability (TPD) Cover

Lump sum benefit is your specified debt payout percentage plus present value of partial income replacement (with income protection assumed to cover balance toward 100% combined replacement) plus $50,000 medical/recovery costs. Maximum entry age typically 62; maximum sum insured is often $5 million (subject to insurer and underwriting).

Trauma (Critical Illness) Cover

Lump sum benefit equals 10% debt payout (illustrative first-year recovery impact) plus present value of partial income replacement over up to 5 years (with income protection assumed to the cover balance) plus $50,000 medical/recovery costs. Maximum entry age typically 62; maximum sum insured often $2 million (varies by definition schedule and insurer).

Conditions and Limitations

Outputs remain illustrative, contingent on the accuracy of user inputs and the validity of applied assumptions. The fixed algorithm and narrow input set cannot encompass all relevant considerations (existing cover, broader assets, health underwriting outcomes, future law changes, or economic shifts).

The calculator does not evaluate eligibility, underwriting acceptance, premium affordability, or policy availability. Estimates are expressed in today's dollar values; indexation features (where offered) can assist in preserving purchasing power.

Disclaimer

This calculator and its outputs are general information only and prepared without consideration of your individual objectives, financial situation, or requirements.

Provided by Merlin Financial Services Pty Ltd (“Merlin”) (Corporate Authorised Representative No. 1315582 of Finchley & Kent Pty Ltd, AFSL No. 555169, ABN 50 673 291 079).

Outputs are estimates only and do not represent personal financial advice, a recommendation, or an opinion on product suitability. To the extent permitted by law, Merlin disclaims all liability for loss or damage arising from use of or reliance on this tool.

Before making any insurance-related decision, consider your own objectives, financial situation, and needs, and consult a qualified financial adviser. Always read the relevant Product Disclosure Statement before proceeding.

User inputs are anonymous and not stored or associated with any personal profile.

Last reviewed: March 2026