"How much cover is enough?" is not a question anyone can answer for you, because no two people carry the same obligations. But there is a way of thinking that helps you find your own answer. Let's work through it step by step.
The basic principle: the sum insured replaces income that has gone
Life insurance delivers a lump sum to the people behind you on the day your income stops suddenly. The right sum is therefore one large enough for them to carry on — clearing the obligations still outstanding and covering expenses during the period of adjustment.
Add it up item by item
- Outstanding debts — the mortgage balance, the car loan, and any other debt you would not want falling on your family.
- Annual family expenses × the number of years you want to provide for — if you want the family to have three to five years to adjust, multiply accordingly.
- Specific goals — such as funding a child's education through to graduation, or money to care for your parents.
- Subtract the assets and cover you already have — savings, a provident fund, the company's group insurance, other benefits.
The total of 1–3 minus 4 is roughly the sum insured you are short by.
Another common approach: a multiple of annual income
A quicker method is to multiply annual income by a number of years — many guides suggest a multiple of annual income as a starting point. It is cruder, but useful for opening the conversation; refine it afterwards with the itemised method above.
Balance it against a premium you can afford
A high sum insured is good, but the premium must be payable continuously. If the figure you calculate exceeds the budget, use term cover, which provides a high sum insured for a low premium, to close the period of heavy obligations, mixed with longer-term cover as your means allow. Cover that is moderate but continuous is usually better than a high sum insured abandoned halfway.
Review it when life changes
The sum that suits you today may not suit you in five years. Marriage, children, buying a home, or debts falling away are all moments to review. We recommend checking at least once a year that the figure still matches your real life.
In short
The right sum insured is not an off-the-shelf number; it comes from your own obligations and intentions. Try the calculation above, and if you would like help fitting the figure to your budget, your agent is always there to talk it through.