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How much life insurance do you need?

It’s important to consider how much life insurance you need, especially if you have loved ones to support and debts you’d want repaid.

The amount of life insurance you take out is a personal choice and some people choose to take more cover than others. 

To help you work out how much you might need, think about:  

What would you want your life insurance to cover?

Depending on your circumstances, you may need life insurance to:

Look after your children or dependants

If you have children – whether they’re young or adult dependants – you may want to think about the type of financial support they may need if you weren’t around. This may include childcare costs, day-to-day living expenses or perhaps carer costs.   

The amount of money needed will depend on:

  • how many children or dependants you have

  • how many years they’ll need support for

The basic cost of raising a child until they reach adulthood for a single parent can be overwhelming.

Support your partner

If you’re the main earner, the loss of your income could have a big impact on your family’s lifestyle. Look at your regular income after tax, as well as your family's ongoing expenses, such as food, household bills or rent. This can give you an idea of how much they may need.

If your partner is the main earner, it’s still important to consider your contribution to the household. For example, if you’re a stay-at-home parent, your family may need money to cover childcare costs to enable your partner to go to work.

 

Pay off your debts

If you have financial obligations, the money received from life insurance can be used to repay the debt, so your family doesn’t have to. The amount of cover needed will depend on how much is left to pay. Your outstanding balance can be found on your latest statement or through online banking or your mobile banking app.  

How long do you want to be covered for?

Once you’ve decided how much you want to cover, you also need to decide how long you want your policy to last.

If you have children to support, you may decide to provide cover until the youngest reaches adulthood and becomes financially independent.  This could be 18 or 21 if they go to university.

If you’re covering your partner, you may need to replace some income until they retire or perhaps they’d need support for a few years to adjust. This is where it’s best to talk to each other about how things would change and what they would need.

If you only want to make sure your mortgage is repaid, the length of your policy will need to cover the term remaining on your mortgage. You may have more than one mortgage account and these could have different end dates so it’s important to check these. 

Do you have savings, investments or an existing life policy?

If you have enough savings or investments available, you may want to deduct this amount from the level of life cover you need. This way, you’re not paying for more insurance than you need. 

You should also consider any life insurance you may already have, through your employer for example. Although, keep in mind that when you leave your job, you’ll lose this cover.

How much can you afford to pay for an insurance policy?

While it’s important to financially protect your loved ones, make sure it’s at a level that you can afford. Keep in mind – the higher your cover amount, the higher your monthly premiums will be. 

However, other factors will also be considered, such as age and lifestyle. For example, the younger you are, the cheaper your quote will be. 

Calculate how much life cover you need

Just tell us what you want to protect and we’ll work out the rest. If you need any help with life insurance, you can also chat to one of our financial advisers. They’ll be happy to recommend a policy and level of cover that’s right for you and your family.