How much insurance cover do I need?
How much insurance cover you need depends upon a number of factors. These include your expected income over your lifetime, debts and future expenses.
There are standards for calculating the perfect cover amount, such as 7 to 10 times your annual salary. You shouldn’t follow any of these rules of thumb, as the amount of cover you need is specific to you.
However, you can quickly figure out a more individual and precise calculation for your own situation.
Here are some things you should include in your calculations.
- Day to day living expenses for your family for a set period of time e.g. the next 10 years.
- If you have children, you need to add up education expenses for each child including university fees.
- Add up all of your debt such as mortgage, loans and credit card bills. This is so your family doesn’t have to worry about meeting these monthly payments.
- You need to think about if you want to contribute to big costs which occur in the family such as children’s weddings.
- If you are from a country where they charge inheritance tax, then you also need to calculate what this will be.
- You also need to think about funeral costs; on average these cost HKD 42,000 to HKD 84,000.
Calculating your cover should only take a short time to complete and is essential when considering how much life insurance cover you need. In the event of your death, your family will be grieving. The last thing that should be on their mind, is their financial situation and how they will get by day to day. By insuring yourself properly, you can make sure your family are well protected and looked after.