By Philippa Billings, Chief Advice Officer, Otivo
Choosing insurance cover can feel like being handed a menu in a language you don't speak, types, amounts, waiting periods, inside super or out. But underneath the jargon it's a sequence of straightforward decisions, taken in order. Break it into steps and the fog lifts. Here's a clear way to work through choosing the right cover for your situation.
Quick answer
Choosing the right insurance cover comes down to a few steps, working out which events you need to protect against, how much cover you need, whether to hold it inside or outside super, and reviewing it over time. As at July 2026, a needs-based approach, matched to your dependants, debts and income, tends to produce a better fit than a default choice.
What events do you need to protect against?
Start here, because it shapes everything else. The main personal insurance types cover three events, death, permanent disability, and a temporary inability to work through illness or injury. Which of these you need depends on your situation, someone with dependants and a mortgage may want protection against all three, while someone with fewer commitments might need less. Deciding which events genuinely pose a financial risk to you is the first and most important step.
How much cover do you need?
Once you know what to protect against, you size the cover. A needs-based approach works best, adding up the debts, income replacement and future costs you'd want covered, then subtracting your existing savings and any cover you already hold, including default cover in super. That calculation gives you a figure grounded in your actual circumstances rather than a generic multiple of income, which can be wildly off for any individual.
Should you hold cover inside or outside super?
This is a genuine choice with trade-offs. Holding cover inside super is convenient, and the premiums come from your balance rather than your take-home pay, though they reduce your retirement savings over time. Holding cover outside super offers more flexibility and access to types not available in super, such as trauma cover, which has not been available inside super for new policies since July 2014. Many people use a combination, and which suits you depends on your needs and budget.
What features matter beyond the amount?
The detail of a policy matters as much as the headline sum. For income protection, the waiting period before payments begin and the benefit period over which they're paid shape how much protection you really have. For TPD, the definition of disability, often whether it's assessed against your own occupation or any occupation, affects when the cover pays. These features determine whether a policy actually responds when you need it, so they're worth understanding rather than skimming.
How do you keep the cover right over time?
Choosing cover isn't a one-off, it's the start of an ongoing fit. Your needs change as you pay down debt, have children, or shift income, so cover that's right today can drift out of step. Reviewing it at major life events and periodically otherwise keeps it matched to your circumstances. Building in that habit is what stops a good initial choice from quietly becoming the wrong amount of cover a few years later.
Frequently asked questions
How do I decide how much insurance I need?
Use a needs-based estimate, adding up the debts, income replacement and future costs you'd want covered, then subtracting your existing savings and any cover you already hold. The result is a figure tailored to your circumstances.
Should I get insurance inside or outside super?
Cover in super is convenient with premiums paid from your balance, while cover outside super offers more flexibility and access to types like trauma cover that super doesn't provide. Many people use a mix, depending on their needs and budget.
What should I look for in an insurance policy?
Beyond the cover amount, look at which events are covered, the waiting and benefit periods for income protection, and how key terms such as the definition of disability are set. These details determine whether the policy responds when you need it.
Where to from here
Choosing well is a sequence of clear decisions rather than one overwhelming one. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a personal insurance inside super module that helps you understand how much personal insurance you might need, based on your dependants, debts, income, age and existing cover. It helps you work through the choices in order.
Sources
- ASIC MoneySmart — choosing insurance and comparing policies — moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.