"Is a million enough?" cannot be answered without knowing the asker's circumstances, because the sum that is enough for a single employee and for a father of two with a mortgage differ several times over. This article collects the main methods used in financial planning. Follow along and calculate as you go.
Method 1: Income-based
The idea: the sum insured should replace lost income for long enough for the family to find their footing. The quick formula is annual income × the number of years you want to give the family to adjust. For example, an income of 600,000 baht a year and a wish to give the family five years means a starting sum of 3 million baht. The advantage is simplicity — a good way to open the conversation. The limitation is that it does not reflect each household's actual obligations.
Method 2: Needs-based
The more detailed method, and one worth doing at least once, is to add up the real items:
- All outstanding debts — for example, a mortgage balance of 2,000,000 baht.
- Annual family expenses × the years to provide for — for example, 360,000 a year × 5 years = 1,800,000 baht.
- Specific goals — for example, 800,000 baht to fund a child's education to degree level.
- Total = 4,600,000, then subtract liquid assets and existing cover — savings of 600,000 + group insurance of 1,000,000 — leaving a shortfall of around 3,000,000 baht.
The figures are illustrative, but the structure works for any household. Its strength is that the resulting sum has a provenance: you can explain what each part is for.
Method 3: Human life value
The longest view is to calculate the income you will earn over your remaining working life. With 25 working years left and an average income of 600,000 a year, the total runs into the tens of millions. This method produces a high figure and is generally used as a reference ceiling rather than a target to reach immediately. It is useful for seeing how far your current cover sits from your own real value.
So which should you use?
The practical recommendation: use method 2 as the core, because it matches your real obligations most closely; use method 1 to sanity-check it; and use method 3 as a reminder that you are worth more than you think. More important than any formula is reviewing it again whenever life changes. Marriage, a child, a house, debts falling away — a sum that was enough last year may not be enough (or may be more than necessary) this year.
A high sum insured still needs an affordable premium
If the figure you calculate is higher than your premium budget, don't lower the target yet — look at the instruments first. Term life insurance provides a high sum insured at a premium several times lighter than a savings-type plan, and suits closing a period of heavy obligations in particular. Mixing plan types to reach the sum you need within a premium you can sustain over the long run is the art of good planning. We have also written a follow-along method in another article, worth reading alongside this one.
If you would like to see your own family's numbers clearly, message us on LINE and we can work through them together — no charge.
This article was inspired by material from the Thai Financial Planners Association (TFPA) and has been entirely rewritten.