LifePolicyFactsThe usual rule of thumb says to buy ten times your income. It is quick, but it ignores whether you rent or own, how many children you have and what you already hold. A better start is to list what would still need paying for if your income stopped.
The four parts
- Debt: cards, car loans and personal loans.
- Income: the years your family would need your pay.
- Mortgage: the balance outstanding, or rent for the period you would want security.
- Education: the cost you intend to cover for each child.
An example
Someone earning 60,000 with a 250,000 mortgage, 15,000 of other debt and two children could land near 960,000 once ten years of income, education and funeral costs are included. After subtracting 100,000 of existing resources, the gap is 860,000.
Things people forget
Workplace cover often ends when you leave the job. Pension, superannuation and state survivor benefits differ by country, so check them before you buy. Revisit the number after a birth, a move or a new loan.
Run your own figures in the Life Insurance Needs Calculator.
Frequently asked questions
Is ten times income enough?
It can be a starting point, but a debt and income based estimate fits your life better.
Should I count my spouse income?
If they could cover household costs alone, you can enter a lower income replacement figure.
Educational content only. Not insurance, financial or legal advice.