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Have full cover while you’re young and it’s cheap, then cut it back as your assets grow. Income protection matters most, trauma the least.
In this episode I explain how we calculate life, TPD and income protection cover, and why the final step is weighing the premium against what that money could earn if you invested it instead. I also cover:
- Why we always use stepped premiums rather than level premiums
- Why life and TPD belong inside super and income protection outside it
- Choosing waiting periods and policy definitions for income protection
- When to review your cover, and why yearly reviews can lull you into keeping too much
The insurance calculator worksheet is free to download from the new resource site at investopoly.com.au.
00:00 Introduction and the new Investopoly resource site
03:57 Insurance as a necessary evil
04:58 Why most advice recommends too much cover
05:55 The four types: life, TPD, income protection and trauma
08:36 TPD insurance: own occupation vs any occupation
10:22 The tension between paying for cover and investing
11:19 Cutting cover back as your asset base grows
13:34 How your insurance needs change across life stages
15:21 Stepped vs level premiums
18:21 How to calculate life and TPD cover
20:42 Weighing affordability against cost
22:33 How much income protection you need
23:26 How premiums and benefits are taxed
25:33 Where to hold life and TPD cover
26:50 Income protection waiting periods
27:55 Policy quality and the three-tier definition
29:01 Why thorough underwriting is worth the hassle
30:06 Trauma insurance: the most optional cover
32:24 When to review your insurance
34:34 Next week: bonds
Related episodes:
- How much you need to retire (October 2026). Referenced at 00:18, and the cut-back-as-assets-grow argument relies on the same are-you-on-track thinking.
- The super report episode (July 2026). Related because it covers choosing a super fund, and this episode covers which funds have competitively priced life and TPD cover inside super.
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Important
This podcast provides general information about finance, tax and credit. It doesn't take into account your specific objectives, financial situation or needs, so you need to assess whether it's relevant to your circumstances before acting on it. If you're not sure, speak to a licensed, trustworthy professional.
