How much life cover does a family need?

Rules of thumb are everywhere. Ten times your income. Fifteen times. They are easy to remember, and they are a poor place to start, because they do not know anything about your family.

A better starting point is a question. If your income stopped tomorrow, what would your family need, and for how long?

Four pieces

Everyday living. The share of your income your family depends on, for the number of years they would need it. For a young family that could be twenty years or more.

Loans. Anything outstanding that would fall on your family. A home loan is the usual one.

Future goals. A child's education, a daughter's wedding, a parent's care. Put an amount against each, in today's money.

What is already there. Existing cover, savings and investments that could be used. Subtract those.

What remains is the gap. That is the number to think about, and it is specific to you.

Two cautions

First, the gap moves. A new child, a new loan, a salary jump. Check it every few years and whenever life changes.

Second, cover and investment are different jobs. Cover is there to replace your income for your family. It is not meant to be a way to build wealth. Mixing the two usually makes both worse.

Try it yourself

Our insurance cover calculator walks through those four pieces. It gives an illustration to think with. It does not recommend any product.

NJ Insurance Brokers Private Limited is registered with IRDAI as a Direct Insurance Broker (Life and General), Regn. No. DB447/09, Licence No. 407. Insurance is the subject matter of solicitation.