Financial planning has two main pillars: wealth creation and protection. Life insurance is a key element of any wealth protection plan but how do you work out how much you need?
Why do I need life insurance?
Do you know all that wealth you are busy creating with your investments?
Do you know how quickly it could be obliterated in the case of your unexpected death?
From experience, we know this can happen fast, leaving families in challenging circumstances—struggling to pay rent or a mortgage, cover school fees or afford general living costs.
Fortunately, it’s very simple to protect that wealth with life insurance.
Life insurance serves as a safeguard for your family’s financial future, protecting your assets in the unfortunate event of your untimely passing.
How can life insurance protect my family?
Life insurance can protect your family in four different ways:
- Against loss of future income: Providing a lump sum payment to your family in the event of your death. This should cover your family’s living expenses, education fees and your spouse’s retirement plan.
- Legacy planning: Life insurance enables you to leave your wealth to your successors, with a specific inheritance for each child, if you so choose.
- Estate tax planning: You can use life insurance to make provisions for estate taxes or death duties. To read about life insurance as an estate planning tool, have a look at this blog post.
- Loan protection: Term insurance taken out against a loan means an insurer will pay off any debt remaining if you were to pass away. This can include mortgages, shorter-term loans, personal loans and credit card or student debt.
How much life insurance do I need?
The key to ensuring that you have sufficient life insurance coverage is to be meticulous in calculating your monthly household outgoings. This handy checklist should help you break it down (some categories may not apply):
Housing & Utilities
- Mortgage or rent payments
- Property taxes
- Home Insurance
- Utility bills (electricity, gas, water)
- Internet and phone bills
- Home maintenance and repairs
Daily living expenses
- Groceries and household supplies
- Clothing and personal care items
- Transportation (fuel, public transport, vehicle maintenance)
Debt & financial obligations
- Outstanding loans (personal, car, business loans)
- Credit card debt
- Student loans
- Tax obligations
- Overdraft
Family & child-related expenses
- School fees and tuition
- Childcare and babysitting costs
- Extracurricular activities (sports, music, hobbies)
- Medical and dental expenses for children
Healthcare & Insurance
- Health insurance premiums
- Dental and vision care
- Prescription medications
- Long-term care or disability coverage
- Life insurance for spouse
Future financial goals & protection
- College or university savings for children
- Retirement savings for a surviving spouse
- Emergency savings fund
- Education/Retraining to enable spouse to return to work
Lifestyle & miscellaneous
- Gym memberships and subscriptions
- Entertainment and leisure activities
- Travel and vacations
- Charitable donations
- Expatriation of family to home country
Once you have tallied up these monthly costs, they need to be multiplied by the number of years they will be needed.
We always recommend life insurance for both parents, whether they work or not. Just imagine how much it would cost to pay someone to do everything that a stay-at-home parent does!
Like any insurance, life insurance may seem like an unnecessary expense – until it’s truly needed. Don’t leave anything to chance. Without careful planning, gaps in coverage may only become apparent when making a claim – and by then it’s too late.
While online life insurance calculators can help you estimate the coverage you need, we strongly recommend seeking professional advice to ensure your family is fully protected.
How to find the best expatriate life insurance policy
- Unsure how much cover you need?
- Don’t know whether to opt for whole life or term insurance?
- Confused about the differences between local and international policies?
- Wondering if your policy will cover you in multiple countries?
- Not sure how pre-existing conditions affect your coverage?
- Worried about the impact of currency fluctuations on your premiums?
- Need guidance on policy exclusions and limitations?
- Feel like you’re not getting a good deal?
Whatever your life insurance concerns, our knowledgeable advisers are here to provide the answers. One of the benefits of working with Infinity is that we have partnerships with many different providers so our advisers can compare cover and costs to find the best solution for you.
Gain peace of mind that whatever happens to you, your loved ones will be protected by getting in touch today.
A leading provider of expat financial services and wealth management services across Asia.
