How Much Life Insurance Do I Need?

So, you’re ready to put some financial protection in place for your loved ones, but you’re unsure of how much coverage to take out. You don’t want your insurance to be inadequate, but you don’t want to end up paying for more coverage than you need. You should aim to strike the right balance between what your family needs and how much you can comfortably afford to pay each month. Here are some helpful guidelines to help you determine the right benefit amount for you and your loved ones. 

Identify your reasons for taking out a policy 

Your reasons for taking out a policy are an important factor in choosing an adequate benefit amount. By identifying your family’s financial needs, you can narrow down a suitable figure. 

A family life insurance policy is a means of providing financial protection for your dependents when you can no longer be there for them. Here are some examples of expenses your loved ones may have to cover should you pass away:  

• Outstanding loans or debts 
• Living costs (consider the effects of inflation) 
• Utilities  
• Education 
• Transportation 
• Retirement costs (for your partner or spouse) 
• Tax bills 
• Family vacation 
• Mortgage payments 
• Funeral costs 

It could be a good idea to have some recent bank statements on hand to help work out your expenditures.  

Choose a suitable policy term 

You must work out how long you would like your life insurance to last. Do you want coverage until your mortgage is paid off? How about until your children have completed their education? It’s important to work out what time period best suits your family’s needs. Our team of experts can help you figure out how long you might want your policy in place for.

Consider the affordability of your monthly premium 

The larger your benefit amount, the more you will pay each month. It’s important to consider affordability of premiums. If you take out a policy that’s larger than you can comfortably afford, it could leave you struggling to keep up with the payments. Our sales team can help you find a suitable benefit amount and a rate of monthly premiums that suits your budget.  

Premiums start from as little as $9.66 per month¹ depending on age, gender and health status.

Find out how much coverage you can apply for 

Cover Direct Family Life Insurance offers an opportunity for you to provide significant financial support for those who rely on you. You could secure coverage of up to $1,500,000 depending on your age.

Here’s what you can apply for depending on your age: 

Minimum Sum Insured

Maximum Sum Insured

Factors that can affect how much coverage you need 

• Your mortgage or monthly rent payments. 
• Your expenditures per month such as childcare, groceries, gas and other expenses. 
• Your household income such as salary, investments and other sources of income. 
• Debts such as loans or credit cards. 
• Savings or existing life insurance coverage. 
• How long you need your coverage to last. 
• How many dependents you have and their ages. 
• Whether you would like to add any optional riders such as critical illness insurance or children’s coverage.
• Considering the effects of inflation on living costs over time. 

Do you want to add optional extras? 

You can add optional extras such as children’s coverage or critical illness insurance. Optional extras offer an opportunity to add an extra layer of protection to your policy. If you would like to add an optional rider to your policy, our team can help you work out the cost of this additional coverage. Read What is Life Insurance to find out more about our optional extras. 

Understand how life insurance premiums are calculated 

The cost of your policy will depend on three things: your age, your health and your lifestyle, including occupation and family history. You see, premiums are affected by how much risk an insurer is taking to cover you. This process is called underwriting. The underwriting process involves assessing the amount of risk an individual poses to an insurer. The underwriter uses this information to determine how much a policyholder should pay for their insurance. 

If you’re a picture of health, you’ve never smoked, you have a normal BMI and you don’t have any pre-existing conditions, then you could secure a lower rate of premiums. If you smoke, are overweight, or you’re in poor health, you might find it harder to secure a cheaper life insurance policy, since it’s riskier for the insurer to cover you. 

Likewise, if you’re older, you could be more susceptible to illnesses associated with old age, which can mean premiums will be higher than average. Underwriters will attempt to determine your life expectancy based on the information you provide. This is why it can make sense to take out a policy sooner rather than later to secure a lower rate of monthly premiums.