It’s a question I am asked on a daily basis, and each person is different. There are lots of different things that need to be taken into account before you can completely know how much you need. Many people say “I just want to cover the mortgage”, but it’s much more than that! What happens to the children and their educational costs, even if they are in a private school? If your spouse works, more often than not, they will be grief stricken and need extended time off work, if they return at all. This has a major impact on the family income.

There’s these things and others which need to be considered. But it doesn’t have to be that hard. All you need is a pen and paper, and 10 fingers, and you can work out an approximate level of cover that’s appropriate for you. Ready?

Now, this is a silly little excercise, but it works! Write down the side of the page:

D, I, M, E and leave room beside them for your calculations. D is for Debt. This is personal debt, such as credit cards, personal loans, business loans (excluding mortgage)

I is for Income. This is your gross (before tax) income. If you are self employed, it’s whatever you take home before tax, after expenses. Multiply this by 5 years to cover for loss of income for that time.

M is for Mortgage. This is the outstanding amounts on your mortgage/s so the total amount will be paid in the event of your death or disability.

And E is for Education. This is your children’s education. How much does it cost to put each child through school? Even if they’re in a public school, you still need to get them uniforms, lunches, stationary, shoes, etc. Work out (roughly) how much is the annual cost of each child, then multiply it by how many years they have left in school. Do this for each child and add it up in this section.

Add them all up and you have the grand total of what you should be starting to look at for quotes. You may have a number that could represent a telephone number, but don’t worry, it isn’t always as expensive as you think. Remember, this is just a guide, so you start here and work your way down. When you talk to your adviser, they can help you with figures and affordability.

I will cover off a few different ways to make insurance more affordable in another post soon.

PD