New parent? Here's exactly how much life insurance you need to protect your growing family, when to get it, and how to avoid paying too much.
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Calculate your exact life insurance coverage needs using three proven methods. Includes real Australian examples, calculators, and expert recommendations.
Let's be honest. You're probably reading this at 2am while feeding a baby, or during a rare quiet moment while they nap. The last thing on your mind is paperwork and policies. You'd rather be sleeping.
But here's the uncomfortable truth: having a child is the single biggest trigger for needing life insurance. Before kids, your death would be devastating for your partner—but they'd survive financially. After kids? The stakes are completely different.
A child can't fend for themselves. They need food, shelter, education, and care for the next 18-25 years. If something happens to you, that responsibility doesn't disappear—it just falls to someone else, without your income to fund it.
This guide cuts through the complexity. No jargon. No scare tactics. Just practical advice on protecting your family, written for exhausted parents who need answers, not another overwhelming to-do list.
What you'll learn:
Let's get started.
Before children, your financial obligations were relatively simple: mortgage, bills, maybe supporting a partner. After children, you're suddenly responsible for:
The brutal maths: If you earn $100,000/year and die when your child is 2, that's $1.6 million in lost income before they even finish school (16 years × $100,000). Add mortgage, education, and your partner potentially working less to care for them, and you're looking at a $2+ million gap.
Here's something people don't talk about: when one parent dies, the surviving parent often can't maintain their previous work schedule.
Even if your partner earns a good income now, losing you could force them into part-time work, lower-paying flexible roles, or periods out of the workforce entirely. Your life insurance needs to account for this.
We all think tragedy happens to other families. The statistics say otherwise:
You don't buy life insurance because you expect to die young. You buy it because your children can't afford the risk of you being wrong.
Most financial advisers use the DIME formula for new parents:
Here's a realistic example for a typical Australian family:
The Family:
Calculating Parent 1's Coverage:
| Item | Amount |
|---|---|
| Mortgage payoff | $620,000 |
| Car loan | $25,000 |
| Income replacement (15 years × $70,000*) | $1,050,000 |
| Child's education (childcare to uni) | $250,000 |
| Emergency fund | $30,000 |
| Total Needs | $1,975,000 |
| Minus: Super + savings | -$215,000 |
| Coverage Needed | $1,760,000 |
*Income replacement assumes replacing 70% of income after personal expenses.
Rounded recommendation: $1.8 million
Calculating Parent 2's Coverage:
Even though Parent 2 earns less, their death would still devastate the family:
| Item | Amount |
|---|---|
| Mortgage payoff | $620,000 |
| Childcare costs (if parent dies) | $180,000 |
| Income replacement (15 years × $50,000) | $750,000 |
| Child's education | $250,000 |
| Total Needs | $1,800,000 |
| Minus: Super + savings | -$215,000 |
| Coverage Needed | $1,585,000 |
Rounded recommendation: $1.6 million
Yes, both parents need substantial cover. The non-working or lower-earning parent's death creates childcare costs and household disruption that require significant funds to manage.
For a more detailed calculation method, see our comprehensive guide: How Much Life Insurance Do I Need?
Get a personalised coverage recommendation based on your family situation, mortgage, and income—not generic rules of thumb.
Get Free Coverage AnalysisLife insurance isn't just one product—it's a suite of protections that work together. Here's what new parents need to know.
What it does: Pays a tax-free lump sum to your beneficiaries if you die or are diagnosed with a terminal illness.
Why new parents need it: This is the foundation. It ensures your family can pay off the mortgage, maintain their lifestyle, and fund your children's future without your income.
Typical coverage: $1-2 million for new parents
Monthly cost: $40-80/month for a 32-year-old non-smoker with $1.5M cover
Key consideration: Choose "stepped" premiums if budget is tight (lower now, increases each year) or "level" premiums if you want predictable costs (higher now, stays flat).
What it does: Pays up to 70% of your income as a monthly benefit if you can't work due to illness or injury.
Why new parents need it: Life insurance only pays if you die. But what if you're diagnosed with cancer and need 12 months off work? What if you break your back and can't lift your child? Income protection keeps the bills paid while you recover.
The statistics:
Typical coverage: 70-75% of your gross income, payable to age 65
Monthly cost: $80-150/month depending on occupation and waiting period
Key consideration: Choose a waiting period you can afford. 30-day waiting periods cost more but pay sooner. 90-day waiting periods are cheaper but require more savings buffer.
For a deeper comparison, see: Life Insurance vs Income Protection: What's the Difference?
What it does: Pays a lump sum if you become totally and permanently disabled and can never work again.
Why new parents need it: TPD fills the gap between income protection (which is temporary) and life insurance (which requires death). If you're permanently disabled, you need capital to:
The critical distinction:
Typical coverage: Same as your life insurance ($1-2 million)
Monthly cost: Often bundled with life insurance for $15-30/month additional
For full details on TPD definitions and claims, see: What is TPD Insurance?
What it does: Pays a lump sum when you're diagnosed with a serious illness—even if you survive and eventually return to work.
Why new parents need it: When you're fighting cancer, recovering from a heart attack, or managing early MS, you can't be thinking about money. Trauma insurance gives you breathing room to focus on treatment and recovery without financial stress.
Commonly covered conditions:
Typical coverage: $100,000-$500,000
Monthly cost: $30-60/month for $200,000 cover
Key consideration: Link trauma cover to your life insurance to avoid the 14-day survival period requirement.
For the complete list of covered conditions, see: What Does Trauma Insurance Cover?
What it does: Provides a benefit if your child dies or is diagnosed with a serious illness.
Why consider it: No parent wants to think about this, but:
Typical coverage: $50,000-$200,000 trauma benefit, death benefit typically covers funeral costs
Monthly cost: $5-15/month
Key consideration: Many adult trauma policies include automatic child cover. Check your existing policy before buying separately.
| Feature | Life Insurance(Recommended) | Income Protection(Recommended) | TPD Insurance | Trauma Insurance | Child Cover |
|---|---|---|---|---|---|
| What triggers payment? | Death or terminal illness | Illness/injury preventing work | Permanent disability | Serious illness diagnosis | Child's illness or death |
| How is it paid? | One-off lump sum | Monthly payments | One-off lump sum | One-off lump sum | One-off lump sum |
| What does it cover? | Mortgage, income replacement, education | Ongoing bills while recovering | Home modifications, lifetime care | Medical costs, time off work | Treatment costs, parental leave |
| Typical amount | $1-2 million | 70% of income | $1-2 million | $100-500k | $50-200k |
| Priority for new parents | Essential (Priority 1) | Essential (Priority 2) | Highly recommended | Recommended if budget allows | Optional |
| Monthly cost (approx) | $40-80 | $80-150 | $15-30 (bundled) | $30-60 | $5-15 |
Costs shown are indicative for 30-35 year old non-smokers. Actual premiums vary based on age, health, occupation, and insurer.
Best time: During pregnancy (or before)
Pregnancy is the perfect trigger to review and upgrade your insurance for several reasons:
Second best: Immediately after birth
If you missed the pregnancy window, act within the first 3 months after your baby arrives. Yes, you're exhausted. But this is when the stakes are highest and your family is most vulnerable.
Warning signs you've waited too long:
Yes. Most Australian insurers cover pregnant women without pregnancy-related exclusions. Standard, uncomplicated pregnancies are no barrier to getting cover.
Exceptions:
Pro tip: Apply during the second trimester. First trimester has higher miscarriage rates (some insurers prefer to wait), and third trimester is when complications are most likely to emerge.
Every year you delay, your premiums increase. Here's what waiting costs for $1.5 million life cover:
| Age at Purchase | Monthly Premium | Annual Cost | 20-Year Total Cost |
|---|---|---|---|
| 30 | $48 | $576 | $11,520 |
| 32 | $55 | $660 | $13,200 |
| 35 | $68 | $816 | $16,320 |
| 38 | $85 | $1,020 | $20,400 |
| 40 | $102 | $1,224 | $24,480 |
The person who waits from age 30 to 40 pays $12,960 more for the same coverage over 20 years. And that assumes they stay healthy. If they develop a condition during those 10 years, they may become uninsurable.
Yes, but with nuances.
If you're on maternity leave and become sick or injured (unrelated to pregnancy), your income protection should still pay. However:
This is where income protection becomes critical. If you develop post-natal depression, suffer a back injury from lifting baby, or face another illness that prevents your planned return to work, income protection pays.
Important: Check your policy's definition of "unable to work." Some policies require you to be actively employed; others protect you as long as you intended to return to work.
Most income protection policies cover pregnancy complications:
What's NOT covered: Normal pregnancy, uncomplicated birth, and standard maternity leave are not considered "illness or injury."
Our advisers specialise in helping new parents protect their families. Get personalised recommendations in a free 15-minute call.
Book Free ConsultationThis seems simple, but many new parents get it wrong.
Option 1: Your partner directly
Pros:
Cons:
Option 2: Your estate (via will)
Pros:
Cons:
Option 3: A testamentary trust (via will)
This is often the best option for families with young children.
Pros:
Cons:
Never leave your beneficiary as "my estate" without a will.
If you die without a will (intestate), your estate is divided according to state law—not your wishes. Your children might receive funds at age 18 with no oversight. Your partner might receive less than you intended.
Action item: Review your beneficiary nominations annually. After having a baby, update them to reflect your new family structure.
If you have life insurance through your super fund:
For new parents: Always use a binding nomination for super-held insurance. Update it after your baby is born to include them as a potential beneficiary.
"My partner earns more, so we'll just insure them."
This ignores the value of the lower-earning or non-working parent. If the stay-at-home parent dies:
Solution: Insure both parents. Even if one earns nothing, their death has a significant financial impact.
Super fund insurance is cheap, but often inadequate:
Solution: Use super insurance as a foundation, then add retail (private) insurance to fill the gaps.
Whole life insurance costs 3-5x more than term life insurance for the same death benefit. New parents don't need lifetime cover—they need maximum protection during their children's dependent years.
Solution: Buy term life insurance with a term that extends until your youngest child is financially independent (age 22-25).
Your insurance needs change dramatically with each:
Solution: Review your insurance annually, and after every major life event. Set a calendar reminder.
Life insurance is important, but you're more likely to be disabled than die young. Without income protection:
Solution: Income protection is not optional for new parents. It's essential.
Here's exactly what to do to protect your family:
Day 1-2: Calculate your coverage needs
Day 3: Gather your information
Day 4-5: Get quotes
Day 6: Review and decide
Day 7: Apply and update beneficiaries
Super fund insurance has pros (cheaper, no medical underwriting) and cons (limited cover, "any occupation" TPD, no trauma). Most new parents benefit from a combination: keep basic super cover as a foundation, add retail insurance to reach adequate coverage.
For a detailed comparison, see: Retail vs Super Life Insurance
For new parents, your policy should extend until your youngest child is financially independent—typically 22-25 years old. If you have a newborn, that's a 25-year term. You can reduce cover later as your mortgage decreases and children become independent.
Yes. Most policies allow you to reduce coverage at any time without penalty. As your mortgage decreases and children become independent, you can scale back cover and reduce premiums.
Both of you need enough life insurance to cover the full mortgage, plus income replacement and education costs. If one dies, the other still has 100% of the mortgage liability.
Life insurance premiums are generally NOT tax deductible when held outside super. However, income protection premiums ARE generally 100% tax deductible—one of its major advantages.
Once your policy is in force, you're covered—even if you later develop conditions that would have excluded you from coverage. This is why getting cover early, while healthy, is so important. New conditions don't affect your existing cover.
Being a new parent is exhausting, overwhelming, and wonderful. The last thing you need is financial worry keeping you up at night (the baby does that plenty).
Life insurance isn't complicated. It's simply a promise that if the worst happens, your children will be protected. Your partner won't lose the house. Your family won't struggle to survive.
The cost of adequate coverage—typically $150-300/month for a complete package—is less than most families spend on streaming services, takeaway coffee, and gym memberships combined. It's one of the best investments you'll ever make.
Get covered. Sleep easy. Focus on what matters most—your family.
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Authorised Representative Number: 1244847 | Australian Financial Services Licence: 246623