HOW MUCH LIFE INSURANCE DO YOU REALLY NEED ANYWAY?



It's easy to say Life Insurance is for someone else, for rich people or unhealthy people but it's important to remember that younger healthier people tend to pay less for their life insurance and it can give you great peace of mind knowing everyone will be looked after.

Obviously nothing can replace you for your familiy. Life Insurance is really just about making sure your loved ones will be looked after financially and don't have those worries when they no longer have your support.

So how much Life Insurance DO you need?
Well you could go with one of those rules of thumb that say you get seven times or 10 times your annual salary. Really though, the question you should answer is, how much would your family need to get by without your income.

If your partner works then providing an income might be less important than ensuring a mortgage or other debts are paid off. If not then providing that income may be vital.

Other  things to consider are the age and number of your children and how long they will continue to be dependents. If you have a very young family then providing a comfortable income for the next 18 years, when your spouse may not be able to work full-time because of bearing the burden of a young family alone, may be necessary. It will certainly relieve pressure. It may be that this is the only period an income is necessary for.

Example: The possible needs of a young family
  • €190,000 mortgage
  • €6,000 car loan
  • €4,000 credit cards
  • 18 years x €43,000 = €774,000
  • €4,000 funeral cost
So if your family were in this position the amount to fulfill all these needs would be €978,000.

If your partner is likely to have a significant income then perhaps that is less of an issue and a smaller total amount might be sufficient to cover any debts and to contribute to any future education needs of your children.

As a minimum though it's wise to cover any immediate funeral expenses and to pay off debt that might be a burden on the family. Mortgages, car loans and credit card debt would be high on this list but student loans and other debt might be still hanging around as well.

Ultimately deciding how much life insurance you need is up to you. Fixing the criteria for how you are going to decide is an important first step. I hope we've given you food for thought.

And if you've already done your calculations then why not see what it would cost you here at Low.ie