Lifewise | Home Insurance 101 How much insurance do I need

How much insurance do I need?

Now we're getting down to the detail. Yet working out how much cover you need to secure your future shouldn't be difficult. It's about asking yourself the right questions and working through a simple process for each type of life insurance.

How much Term Life Insurance cover is enough?
Having the right level of Life Insurance requires you to think about what debts you'd like to pay off and how much you'd like to leave to your family to meet their future financial needs if you were to die (remember your debts won't die with you). An easy way to look at this is:

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The main questions to answer are:

How much money will my family need to pay off all debts, like mortgage, credit cards or personal loans?

How much money will my family need after my death to meet immediate expenses, like funeral expenses and unpaid medical bills?

How much money will my family need after my death to maintain their standard of living in the long run?

This may sound simple enough, but can actually get pretty complicated - to get a general sense of your needs, check out the Lifewise insurance needs calculator. It'll provide you with an estimate of your insurance needs in a matter of minutes. But remember, this is only an estimate. Talk to your family and friends about it or seek advice from a professional financial planner.

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How much income protection insurance is enough?

(also called 'disability income' or 'salary continuance insurance')

Most income protection policies will provide you with cover for up to 75% of you gross income. This is typically enough to cover the essential costs of living. Alternatively, you can reduce your premiums by taking out a lower level of cover.

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You may choose to insure yourself for less than 75% of your current income in order to reduce your premiums, especially if it becomes a choice between taking out some income protection or none at all. If this sounds like you, start by working out a yearly budget. The yearly budget planner can make this easier to do.

Once you have a good estimate of how much money you will need each year, you can use this to form the basis of your sum insured.

Remember that your premium is tax deductible but don't forget to allow for taxation on your income.

Check out the Lifewise insurance needs calculator. It'll provide you with an estimate of your Income Protection needs in a matter of minutes. But remember, this is only an estimate. Talk to your family and friends about it or seek advice from a professional financial planner

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How much Total and Permanent Disability insurance is enough?

There is no set rule for estimating your Total and Permanent Disability Insurance needs. Here you should bear in mind that this type of cover is usually an inexpensive add on to Life Insurance and for that reason may automatically be set at the same amount. Nevertheless, you should consider how much insurance you would need to maintain your lifestyle if you became disabled.

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The main questions you should ask yourself are:

Would I need a regular income stream to fund my lifestyle and retirement indefinitely? How much would I need as a lump sum to generate that income stream?

Would I need to cover the costs of treatment and rehabilitation?

Would I need to make any modifications to my house to make life easier?

After you've answered these questions you are in a much better position to assess whether you have the right amount of cover.

At this stage our insurance needs calculator doesn't include an estimate of your Total and Permanent Disability Insurance needs. We are planning to update the calculator in the coming months so that you can get a good idea of how much cover you might need. In the meantime, talk to your family and friends about it or seek advice from a professional financial planner.

How much Trauma insurance is enough?

The purpose of Trauma Insurance is to keep your life on track if you are struck with a sudden, debilitating illness, many policies allow you to set your own levels of cover so its worth thinking about how much you need.

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The main questions you should ask yourself are:

Would I need to pay off debt? And if so, how much?

Roughly, how much do you think treatment might cost?

Would I need to make any modifications to my house to make life easier?

Would I return to work after recovery or would I retire to focus on my health?

After answering these questions you will be able to estimate how much cover you need.

At this stage our insurance needs calculator doesn't include an estimate of your Trauma Insurance needs. We are planning to update the calculator in the coming months so that you can get a good idea of how much cover you might need. In the meantime, talk to your family and friends about it or seek advice from a professional financial planner.