Our earlier articles have answered "how much cover should I have?" This one answers the next step: knowing the figure, how do you build that sum as intelligently as possible within a real budget? Because three million baht of cover built the right way or the wrong way can differ by double in premium. Here are the three main approaches.
Approach 1: Liability-matched cover
The idea: match the sum insured one-to-one with debts and obligations that have an expiry date. Eighteen years left on the mortgage — use 18–20 year term cover equal to the debt. Twelve years of school fees ahead — use another slice of term cover spanning that period. The strength is the lowest premium per baht of cover, and cover that expires alongside the obligation, so you never carry more premium than necessary. This suits the core of almost every family in its building years. The advanced technique is buying several slices of term of different lengths, layered like a staircase, so that the total cover falls as the obligations are discharged one by one.
Approach 2: Income replacement
The idea: see the sum insured as a replacement income machine for the family, setting it from annual income multiplied by the number of years you want to provide for — an income of 600,000 a year and a wish to provide for eight years gives a starting sum of 4.8 million (illustrative figures). This approach answers families whose expenses are tied primarily to the main earner's income rather than to any particular debt. Term cover remains the core instrument, because the period of dependence has an end. Add disability cover, which answers "the income is gone but the person is still here" — something the liability-matched approach tends to overlook.
Approach 3: Legacy building
The idea: the sum insured is not only a shield but an asset deliberately intended to pass to the people behind you, whenever we go. This approach uses whole life cover as its main instrument, because the cover never expires before we do. It suits goals such as money to look after a partner in old age, a minimum inheritance for each child, or liquidity for an estate consisting only of hard-to-sell assets, as we describe in our article on estate planning with life insurance. The premium per baht of cover is higher than term, so this should be the layer built once the first two approaches are in place.
Combining all three into one portfolio
Most families do not choose one approach but mix them with the rhythm of life. A common structure: the lower base is term cover clearing the mortgage plus term cover replacing income while the children are young, together a large sum at a controlled premium; the upper layer is a moderate whole life sum for passing on. Once the debts are gone and the children grown, the term layers expire by themselves, leaving the legacy layer working long term. The total premium therefore breathes with life, in line with the sustainability principle we have written about.
Before you build: three opening questions
One: which approach does your obligation mainly fall under — debt, dependent income, or passing on? Two: what is your sustainable premium budget (no more than around a tenth of income)? Three: what do you already have, such as group insurance, and which layer does it count as? Answer all three and the structure draws itself. If you would like help sketching your family's three-layer portfolio, message us on LINE any time — no charge.
This article was inspired by material from the Thai Financial Planners Association (TFPA) and has been entirely rewritten.