Life Life insurance - how much is enough?

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thatbeatsall

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hi everyone, how much life cover is roughly enough for each parent when the couple has two kids, both in primary school? For example, is three times the husband's salary enough in addition to mortgage cover?
 
There's no simple formula for working out how much is enough. Everyone's circumstances will differ. Here's one method: -

  • Work out what your net monthly income requirement is to run the household.
  • Take away your monthly mortgage repayment as this would be covered separately in the event of either death.
  • If one partner is a stay-at-home parent, add back the cost of childcare in the event of their death.
  • You then have a monthly figure that needs to be replaced in the event of either death.
  • Use Excel to figure out what size of a lump sum would be needed to replace the above monthly income until you no longer need it, typically retirement age. Include interest on the lump sum and an allowance for inflation.
  • Take off the value of any investments, savings you have.
A good broker or life assurance salesperson should be able to do those calculations for you if you prefer.
 
LDFerguson has made good points just make sure you do take something out. If you are self employed or in non pensionable employment, one can effectively double the cover or half the premium if on high tax rate. The number of people I know who have said they MUST take out more life cover..............
 
LDFerguson has put it aptly. There is no simple formula for working out how much is enough. Everyone's needs differ as per their lifestyle and financial responsibilities. To come to a more accurate figure, make note of all the expenses that your family may need to bear in case of your death - loan and mortgage payments, daily living expenses, education expenses, and even seemingly minor expenses such as child care costs.
Online life insurance calculators will help you estimate the amount of life insurance you need.
If you are in your 30's most insurance experts, recommend aiming for a death benefit of 10 - 15 times your current annual income.

Denise at AccuQuote
Disclaimer: I work for AccuQuote and this is my personal opinion.
 
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