How much life insurance cover do you need?

Martine Coven


One of the biggest benefits of life insurance is having the peace of mind knowing you have something saved for your loved ones. But figuring out how much coverage to take out can be tough. This explains why so many people fall short on their target to get sufficient coverage required for their family members.

In this quick guide, we share a few simple tips on how to determine the right amount of coverage your loved ones need. Let’s jump right into it!

How to calculate how much coverage you should have

When you are ready to purchase life insurance, the first step is to try and understand how much coverage you need and what your options are.

Firstly, you will want to look at your current financial situation and compare it to what the recommended limits are for life insurance.

Secondly, you will need to determine whether you want a term or Whole of Life policy. Term coverage can last up to a certain number of years, while the latter lasts as long as you live. Of course, this depends on whether you’re able to pay your premiums as agreed until the end.

Finally, you will also want to think about your financial goals and how much money you want to spend on life insurance.

Using financial advisers vs. doing it yourself

Many people choose to purchase life insurance using a personal financial advisor or independent insurance broker because they can help navigate all of these steps and find the best insurance for their needs and budget.

Also, good advisors typically have access to different life insurance policies from several reputable companies, and can quickly provide a quote for you.

Alternatively, you can use tools like this critical illness calculator to get an idea for how much coverage would be appropriate for your situation. These calculators take into account factors such as age, health, income and marital status.

Once you have an estimate for the coverage you need, start shopping around and compare rates. Remember, different life insurance providers will offer different rates for the same amount of coverage, so it’s important to find one that offers the best value for your needs.

Factors to consider when determining your ideal life coverage

A few things come to play when calculating how much life insurance you need. We take a look at three of the most important ones in this section, including debt level, current health status and income level.

Debt levels

Debt levels can be a major factor in how much coverage you need. This includes both consumer and non-consumer debt such as mortgage, car loans, and credit cards.

Typically, people with lower debt levels will need more life insurance coverage and vice-versa. Generally speaking, proceeds from your policy should be able to pay off your outstanding debts so you can leave your loved ones without worrying about them.

To calculate the amount of life insurance you need, start by assessing your current financial situation. Include your current monthly mortgage payment, car loan payments and other ongoing expenses in your calculation. Be sure to factor in potential future fluctuations in these costs as well.

Then, subtract any extra money that you would like to set aside for retirement or other financial goals. This will give you a rough idea of the amount of life insurance you may need.

Health history

Next, look at your health history. Are you generally healthy? Do you smoke? Are you overweight? If you answered yes to any of these questions, your life insurance policy will probably have higher premiums. This is because these factors increase your risk of developing health issues and consequently increase your risks.

Income levels

Income levels also dictate how much life insurance you may need. There are no hard and fast rules here but generally, if you’re earning a low or modest salary, you might only need a basic life insurance policy that provides limited coverage.

On the other hand, if you make significantly more money, you may want to consider expensive policies with more comprehensive coverage and benefits.

Also read: Insurance Bad Faith Claims in

So, how much life insurance cover do you need?

There’s no one-size-fits-all answer to this question, as everyone’s needs will be different. Even so, it’s always recommended to speak to an expert to get a good measure of what you need, how much you can afford and the available payout.

Overall though, factors such as your age, health status, financial commitments and income levels will guide you on what type of cover is right for you. Good luck!


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