How Much Insurance You Really Need?

“I already have life insurance.”

This is the common answer I usually get every time I ask somebody if they have a life insurance and how much is their guaranteed protection. But when I asked them, “Since you already have an existing coverage, do you think is it enough?” Some of them told me, ‘yes, I think so’ or ‘I do not know’.

The best reasons why would a person like to get a life insurance are: (1) to protect his greatest asset--his ‘self’ and (2) to protect his family (for head of the families or breadwinners) and his dreams for them. Because life insurance gives your family immediate financial security, but this does not mean that you can only get the benefits of life insurance when you die. 

Remember what I have mentioned about the investment and savings plan called “Sun MaxiLink Prime” (insurance with investments)? Click here to read the full article. There are life insurance policies like traditional plans and insurance with investments plans called variable unit-linked or VUL as the Sun MaxiLink Prime that can give you ‘living benefits’ such as cash values, accumulated dividends and investment fund values (depends on what type of plan/s you would choose) in case you live too long after your retirement years. 

Also, when getting life insurance, you must consider the following factors:
      A. Life insurance is more expensive as you get older
      B. Males have higher premiums than females
      C. Smoker vs. non-smoker rates
      D. Best to get when you’re young and still healthy


But how much insurance do you need? Let me show you a simple computation in determining the amount of continuing income for your family or the coverage you really need to have.


  1. Find out how much is your family’s monthly expenses. Compute all your  monthly bills: electricity, food, water, clothing, rental fee and telephone. For example, your monthly expense is Php30,000
  2. Get the annual household expenses. Multiply your monthly expense by 12. Php30,000 x 12 (months) equals Php360,000
  3. In case head of the family will die, the surviving dependents need an annual income of Php360,000–which then “replaces” the household expenses of the family.  That’s why we call life insurance as an “income replacement” tool
  4. Determine how much the current interest rate of the bank is. Let’s use  4% interest rate
  5. Divide your annual expenses by the interest rate of 4%. Php360,000 / 0.04 equals Php9 million
  6. Therefore, the head of the family or breadwinner requires Php9 million in protection fund or life insurance coverage

Why Php9 million? Because if the surviving family members will receive the amount and invest it in a time deposit or any 4% (interest rate per annum) bearing investment vehicle, then it will generate Php360,000 in interest income every year or a monthly income of Php30,000.

If you already have a life insurance, now maybe the time to check with your financial advisor if your existing coverage is enough or not. But if your budget constraints you, try to get a Term insurance which is the cheapest type of life insurance with a maximum protection but no living benefits.

You may also contact me (call/text at +632933-2014898 or +632916-4385451, email at jacquinoynay@gmail.com) or by leaving a comment below if you do not have a financial advisor yet. I can help you to come up with a plan based on your needs and goals.

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