Wealth Sep 21, 2020

How much life insurance cover should I have?

5 min read

How much life insurance cover should I have?
How much life insurance cover should I have?
How much life insurance cover you need is highly individual, typically no two people have the exact same set of circumstances.

Ensuring an appropriate amount of insurance is important, you don’t want to put your family in a situation where you’re underinsured, and they struggle to pay the bills. Over-insuring yourself and paying high premiums on a high level of cover that you don’t actually need doesn’t necessarily make sense either. Getting personal advice from Entourage Wealth is a great idea if you’re unsure how much cover you require to protect your family and assets should the unthinkable occur.

Some things to consider when looking at how much cover you take out include:

How much debt do you have?

Lots of people ensure they have enough insurance in place to pay out all their debt. This includes things like mortgage, credit card, personal loans or car loans.

Do you have any dependents and how old are they?

Children and dependents will have ongoing expenses such as childcare or school fees, extracurricular activities and ongoing expenses.  You may want to send your kids to private school, cover their university fees or have been saving to help them buy a property. These costs can be extrapolated until the child is no longer dependent and used to help calculate how much cover you might need here.

What is your income?

You might like to ensure you have enough insurance cover to replace the income you would have been generating and contributing to your family’s finances. Which leads us to the next step.

When are you planning on retiring?

When you’ve identified your income, the next question is when you plan on retiring. Knowing how many years until your retirement age, you’ll have an idea as to how much income you would otherwise have been contributing and can consider covering via your life insurance.

What is your partner’s income?

If you have young children or dependents, then your partner’s earning potential may be impacted if they need to take time off to care for them. There’s also the possibility your partner may need to hire support in the form of a nanny or au pair to allow them to work, which will result in additional expenses.

It’s challenging to know how a surviving partner’s earning potential may be affected over the long term. If this is something you are planning to factor in, it’s a good idea to get some advice from Entourage Wealth first.

What’s the maximum cover I can take out?

Some insurance companies have standard amounts they will insure up to, beyond which you’d need to provide additional justification as to why you require the level of cover identified. Seeking some guidance from a financial adviser is a good place to start, or if you plan on calculating your own level of cover, just remember to keep track of how you ended up at the sum insured chosen.


This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. (if relevant: before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement).