In short
- There is no standard figure: the cover to consider is the gap between what your family would need and what they would already receive.
- Ute, tool and equipment finance, business loans and personal guarantees often push a tradie’s number higher.
- Default death cover in super is usually well short, so check the amount, whether it is active and your beneficiary nomination.
- Review the figure when you refinance, finance new equipment or your family changes.
Unfortunately, there is no standard figure. The amount of cover you need is the gap between what your family would need if you passed away and what they would already receive, and working that out takes about twenty minutes with your loan statements and your super statement in front of you.
Three things widen that gap for tradies than for someone on a salary: debt tied to the business as well as the house, an income that stops the day you do, and default cover through super that is usually well short of the number you need. In this article, we explore how to work out the cover amount for life insurance held by tradespeople in Australia.
How to Work Out How Much Life Insurance You Need
ASIC’s Moneysmart sets out the calculation in two halves. Add up what your family would need, add up what they would receive, and the difference is the amount of cover to consider.
Needs vs. Resources in a Tradie Household
| What Your Family Would Need | What Your Family Would Receive |
| Mortgage balance | Super balance, including any death cover already attached |
| Ute, trailer and plant finance | Savings and offset account |
| Tool and equipment finance or leases | Value of any investments that could be sold |
| Credit cards and personal loans | Accrued leave, if you are a PAYG employee |
| Funeral and estate costs | Your partner’s income, present or potential |
| Living costs for a set number of years | Sale proceeds of business assets, if there is a buyer |
| Childcare or school fees | Any employer or union scheme death benefit |
| A buffer for the period before your partner returns to work | Support from extended family, if it is realistic to count on |
Work in real numbers rather than estimates where you can. Moneysmart’s life insurance calculator will do the calculations for you, and having a specific figure makes it much easier to compare policies without over- or under-insuring.
Do Income Multiples Work in Estimating Cover?
You might often see cover suggested as a multiple of income, commonly ten times annual earnings. It is a reasonable quick check on a number you have already calculated, but a poor way to arrive at one, because it ignores the two variables that matter most: how much you owe and how long your family would need support.
For example, two carpenters both earning the same amount can need very different cover. One has a recent Perth mortgage, two children under ten and a financed ute. The other owns their home outright with adult children. The income multiple will give them the same answer, despite the fact that their needs vastly differ.
How Business Debt & Equipment Finance Affect a Tradie’s Cover Amount
This is the main reason a tradie’s number tends to be higher than a comparable salaried worker’s. Alongside the mortgage, there is usually finance attached to the means of earning.
- Ute or truck finance, often a chattel mortgage rather than a personal loan
- Trailer, plant and specialist tool finance or leases
- Equipment leases with an early termination cost
- Business loans or overdrafts, frequently secured against the family home
- Personal guarantees given as a company director
Personal guarantees deserve particular attention. Where you have guaranteed a business loan or an equipment lease personally, that obligation generally does not disappear on death; it typically becomes a claim against your estate.
Guarantees also tend to be forgotten, because they are signed once and then not thought about again. It is worth listing every guarantee you have signed and confirming the position on each with your accountant or solicitor, since the wording varies.
The practical point is that a cover amount set only against the mortgage can leave a family holding business debt with no business income to service it.
The Impact of No Sick Leave on Your Family’s Needs
If you are a sole trader or a subcontractor, there is no accrued leave and no employer buffer sitting between the household and a loss of income. For a PAYG tradie, there may be several weeks of leave to draw on, which is a genuine resource and belongs on the right-hand side of the calculation.
This affects the cover amount because life insurance pays a lump sum, which has to cover a transition period while also clearing debt. A family that needs eighteen months before a partner can return to full-time work needs those eighteen months funded, on top of the mortgage.
Importantly, life cover only responds on death or terminal illness; the related risks of being unable to work through illness or injury are handled by income protection and TPD cover, which are sized on a different basis.
Read more: What Factors Impact Life & Income Protection Insurance for Tradies?
How Much Life Insurance Do Tradies Have Through Super?
Most tradies have some death cover already, through a default arrangement in their super fund. It counts on the resources side of the calculation, but only at the amount actually attached to your account, which is often modest relative to a current mortgage.
Four factors are worth checking on your most recent super statement.
| What to Check | Why It Affects Your Cover Amount |
| The death benefit amount | Default sums are frequently well short of a current Perth mortgage plus vehicle and equipment finance |
| Whether cover is still active | Cover attached to an inactive account can lapse, and tradies who change employers or subcontract may hold several accounts |
| Whether you have nominated a beneficiary | Without a nomination, the trustee decides, which can extend the time a claim takes to finalise |
| Whether the fund applies occupation loadings or exclusions | Some funds treat manual occupations differently, which can affect the amount available or the terms |
Beneficiary nominations are the most commonly missed of these factors. ASIC’s 2025 review of death benefit claims handling found that almost 60% of super members had no beneficiary nominated at all, and only 10% had a binding nomination in place. A nomination costs nothing to lodge with your fund and generally shortens the process for the people making the claim.
Cover held inside super and cover held outside it can sit alongside each other, and many households end up with a mix. Rules on eligibility, tax treatment and payment vary between funds and policies, so read your fund’s insurance guide and the relevant Product Disclosure Statement (PDS) rather than working from the balance shown on the statement alone.
Practical Calculation Example for a Perth Tradie Household
The figures below are illustrative only, chosen to show how the calculation runs rather than to describe any real household. Yours will differ.
Assume a 38-year-old self-employed electrician with a partner working part-time and two primary school-aged children.
| Needs | Amount |
| Mortgage balance | $620,000 |
| Ute and trailer finance | $55,000 |
| Tool and equipment finance | $18,000 |
| Credit card and personal loans | $12,000 |
| Funeral and estate costs | $20,000 |
| Living costs, 10 years at $65,000 | $650,000 |
| Total needed | $1,375,000 |
| Resources | Amount |
| Super balance | $145,000 |
| Default death cover in super | $180,000 |
| Savings and offset | $40,000 |
| Partner’s income over the period | $260,000 |
| Total available | $625,000 |
On these assumptions, the gap is $750,000, which is vital to consider. Take note how much of the total sits in the two lines a salaried worker would not have: vehicle and equipment finance accounts for $73,000 before the mortgage is touched.
For context on the mortgage, the ABS reported an average new owner-occupier loan of around $735,000 nationally in the March 2026 quarter, with Western Australia recording the largest year-on-year increase of any state, up roughly $109,000. A cover amount set three or four years ago may no longer match the debt it was meant to clear.
When Should Tradies Review Their Cover Amount?
Cover set once and left alone drifts out of line with the household it was arranged for. These events generally change the number.
| Event | Effect on the Cover Amount |
| Buying or refinancing a home | Usually the largest single change, in either direction |
| A new child | Adds years of living costs and possible childcare or school fees |
| Financing a new ute, trailer or plant | Adds debt directly to the needs side |
| Taking on employees or apprentices | Adds business obligations and may raise the case for separate business cover |
| Signing a personal guarantee or a commercial lease | Adds a contingent liability many people do not count |
| A partner returning to or leaving work | Changes the resources side substantially |
| Children becoming financially independent | Often reduces the number, and premiums with it |
| Paying off the mortgage | Often reduces the number considerably |
A review does not always mean increasing cover. Reducing it where the need has genuinely fallen is one of the more reliable ways to bring a premium down.
How We Help Perth Tradies Set the Right Cover Amount
Working out the number is the part most people find tedious rather than difficult, and it is the part we do with clients at the kitchen table. We go through the loans, the finance agreements, the guarantees and the super statements, put a defensible figure on the needs and the resources, then compare across the insurers on our panel to see what that level of cover looks like on realistic terms for your trade.
Absolute Insurance has been arranging personal cover for Western Australian families since 1998, and a good share of our clients are tradies and their families. If you would like help putting a number on it, get in touch for an obligation-free consultation.
Frequently Asked Questions
Is a life insurance payout taxed when my family receives it?
It depends on where the cover is held and who receives the money. A lump sum paid from a policy held outside super to a nominated beneficiary is generally not taxed as income. Death benefits paid from super can be taxed differently depending on whether the recipient is a tax dependant, which is a specific definition and not the same as a family member. Confirm your own position with your accountant or check the current guidance on the ATO website before assuming a payout will arrive intact.
How long does a life insurance claim usually take to pay?
Straightforward claims on policies held outside super are often settled within a few weeks of the insurer receiving a death certificate and the completed claim forms. Claims through super typically take longer, because the trustee has to determine who should receive the benefit as well as assess the claim, and that step is slower where no binding nomination exists. Timeframes vary by insurer and by circumstance.
Should my partner have life insurance if they do not earn an income?
It is worth calculating rather than assuming. If your partner does the majority of the childcare, replacing that care commercially while you keep working is a real cost, and one that often surprises people when they price it. The calculation is the same as the one above, with the needs side reflecting what would have to be paid for rather than earned.
Do I need separate cover for my business partner or is my own policy enough?
A personal policy pays your beneficiaries, not the business, so it does not by itself let a surviving partner buy out your share or keep the business running. Arrangements that deal with that sit alongside personal cover and are usually written as a buy-sell agreement. Where a business would struggle without one particular person, key person insurance is the cover that addresses it.
What happens to my cover if I have a quiet period between jobs?
Cover held outside super continues as long as the premiums are paid, regardless of whether you are working. Cover inside super depends on contributions continuing and the account remaining active, so a long gap between jobs is exactly when super-held cover is most at risk of lapsing. If you expect a quiet stretch, check the inactivity rules with your fund first rather than after.
This information is general in nature and does not take into account your personal objectives, financial situation or needs. Before acting on it, consider whether it is appropriate for you and read the relevant Product Disclosure Statement.
Reviewed by Greg Maguire
Greg Maguire reviewed this article to make sure the information is accurate and reflects current insurance practice. It is general advice only and does not take your personal circumstances into account.
Greg Maguire is an Authorised Representative (No. 255354) of AD Advisory Services Pty Ltd, ABN 68 005 830 802, AFSL 237058.
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