We have written about calculating a sum insured from several angles — the formulas and auditing what you have. This article adds the final dimension that completes the plan: sustainability. Because a precisely calculated sum insured that is not held to the end protects nobody at all. Here is how to set a sum that is right today and survives to the day it is needed.
Pillar 1: Right — the sum must come from real obligations
The short version: the right sum insured = debts + family expenses through the adjustment period + the goals you want to keep providing for − existing assets and cover. That figure should not come from a feeling or an off-the-shelf package. The detailed method is in our article on how much life cover you need. The point to add here: a sum beyond what is necessary is also unsustainable, because the excess premium is a burden that erodes your ability to hold it long term.
Pillar 2: Affordable — test it against the bad year, not the good one
A policy's sustainability is measured in the difficult year. Before agreeing to any premium, test three scenarios. One: if income fell by a quarter, could you still pay? Two: if a large new expense arrived — another child, a car loan — would this premium still have room? Three: do total premiums across all policies exceed around a tenth of income? If the answers start to feel uncomfortable, restructure today — better than abandoning the policy halfway at a point when starting again is impossible.
Pillar 3: Flexible — designed to adjust with the rhythm of life
Obligations are not a straight line. They curve up while a family is being built and curve down once the debts are cleared and the children grown. A sustainable sum insured should therefore be designed in layers that can move.
- The permanent base layer — the amount you want in place for life, such as money for final arrangements and a minimum inheritance, using whole life cover with a level premium.
- The temporary obligation layer — the large sum needed while paying a mortgage and raising young children, using term cover that expires alongside the obligation, so the premium for it is not carried for life.
- The event layer — increased or reduced as life changes: add term cover when taking a new loan, reduce the sum once the debt is cleared.
A layered structure lets the total premium breathe with your life rather than staying rigidly tight.
Common traps that make a plan unsustainable
- Setting the sum in the mood of a peak-income period, then meeting a quiet year and being unable to pay.
- Using the wrong instrument for the job — using an expensive savings-type plan to carry a large protection sum.
- Never reviewing, so the sum falls behind the obligations (too little) or exceeds obligations already gone (wasted premium).
- Forgetting inflation — a million today and a million in twenty years have very different purchasing power. Periodic review is the answer.
The recommended review cycle
Set two rhythms. One: a light annual review, checking that the obligations and the sum insured are still close. Two: a major review whenever a significant life event happens — marriage, a child, a mortgage, changing jobs, clearing debts — using the 90-day frame we recommend in our article on planning by life stage.
In short
A good sum insured needs all three pillars: right for the real obligations, affordable even in a bad year, and flexible enough to adjust with life. Design it in layers with the right instrument for each, and the cover will stay with you all the way to the destination. If you would like to design your own layered structure, message us on LINE and we can set it out together — no charge.
This article was inspired by material from the Thai Financial Planners Association (TFPA) and has been entirely rewritten.