Life Insurance Calculator: How Much Coverage Do You Need?

Kevin Pratt

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Interested in getting some life insurance? One of the first questions you’ll need to answer is, how much cover do I need? To help you work this out, we’ve created a calculator, below.

Answer a few simple questions and we’ll give you a suggested amount of cover to buy. You don’t have to take this figure as read, though. You may decide to select more, or less, depending on your circumstances and budget.

How to Use The Life Insurance Calculator

Here’s a step-by-step guide on how to use the calculator. Remember that the answer you get will reflect the information you provide. You may decide to select a different amount according to your particular circumstances.

Step 1. Tell us how much money your dependents would need each year if you were no longer around

If you and/or your partner earn salaries, your take-home pay would be a good place to start. If you do not have a paid job but look after the home and family, how much would it cost every year to pay for outside help?

Step 2. Tell us how long your dependents would need financial support

The answer to this question will decide the ‘term’ of your policy. Ideally, you should provide enough cover until a point in the future when you believe all your dependents will be financially self-sufficient.

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Step 3. Tell us about any debt you have

One of the prime uses for life insurance is to clear any debts you have in one fell swoop so they will not be a burden to your family. Any outstanding mortgage in your name is the main example, but don’t forget any other debts you may include any that might be in joint names.

Step 4. Tell us about your likely funeral expenses

Funeral costs can run into many thousands of dollars. In fact, today’s average cost is around $10,000. You may decide you want a more expensive arrangement so, unsavory as it might feel, it’s definitely worth including the sum in your calculation.

Step 5. Tell us about your savings and investments 

If you have substantial savings or an investment portfolio, you may decide those funds could be used to support your family if you were to die. This would reduce the amount of insurance you would need to buy.

Step 6. Tell us about any existing life insurance you may have

You can have more than one life insurance policy, but if you have cover in place already, it makes sense to take this into account when working out how much more you need to buy. Don’t forget any life insurance benefit you may receive from your employer if you are still working.

Once you’ve entered all the relevant information, the calculator will give you an idea of how much life insurance you need. Armed with this information, you can start comparing policies and how much they cost.