How Much Life Insurance Do I Need?


There is no exact “how much life insurance” figure that you should put in place so don’t worry about trying to calculate an exact amount.


There are two ways to calculate how much life insurance you need:


1) Lump Sum Life Cover


Life cover leaves a lump sum to replace your income when you die? Here are two typical ways to calculate you approximate requirement.


Say you earn €30,000 and expect to earn that for the next 30 years. Had you died yesterday your lost income would be estimated at €30,000 every year for 30 years = €900,000 (not including pay rises, bonuses etc).


So do you need €900,000 worth of cover? Not really.


On your death your mortgage would be cleared by your mortgage protection policy (If you do have one) so that would be one large outgoing taken care of plus the costs of clothing, feeding and providing for you would also end.


E.g.      €30,000 x 30yrs = €900,000 x 0.66 = €594,000


Another way of calculating how much life insurance is to put a policy in place for the period until your youngest child is no longer a dependent e.g. 25 years of age. (They should be out from under your feet by then!)


E.g.      25 – 7= 18x €30,000 = €540,000


2) Monthly Income Life Cover


The new way of calculating how much life insurance you need is called Life Cover (monthly income).


Estimating a lump sum as we did above can be difficult. It is easier to calculate the regular monthly income that your family will lose on your death.


e.g. like in the example above we’ll say you earn €30,000 per year, you earn €2500 per month.


If you put a Life Cover (monthly income) policy in place, it will pay €2500 per month from the day you die until the expiry date of the policy. It’s as simple as that. There is no need to calculate a lump sum or put your family through the worry of trying to invest it wisely. You just figure out how much they would need to survive each month and put that much cover in place.


This type of policy can also be more cost effective

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