How Much Life Insurance Coverage Do I Need?

We all want to make sure our families are okay if something unexpected happens. Life insurance can help with that. Life insurance is a contract between you and an insurance company, where you pay regular premiums in exchange for a sum of money that is paid out in the event of death, total & permanent disability, or loss arising from any other specified situation.

Why you need life insurance in Malaysia

Life insurance coverage is useful at every stage of your life, such as when single, married, or married with children.

For single individuals, the significance of life insurance extends beyond your own financial protection. Many single people have the responsibility of caring for ageing parents or supporting younger siblings. Life insurance for singles ensures that your loved ones will continue to have much-needed financial support in your absence.

As life progresses into marriage, the shared commitment to support each other takes centre stage. Life insurance can become one of these promises, offering financial protection to your partner and even kids in your absence.

Determining your life insurance coverage

Understanding the 10x rule

The question is, how much insurance do you need? A widely accepted starting point in financial planning is the “10X rule”. This guideline suggests that your life insurance coverage should be approximately ten times your annual income.

For example, suppose you earn a yearly income of RM50,000. Then, your life coverage would be RM50,000 x 10, which is equal to RM500,000. In this scenario, you would aim for a life insurance policy that offers you a coverage of RM500,000.

Assessing personal factors

However, the 10x rule is just a starting point. Each family’s situation is different. There are several factors that can influence your final decision on coverage.

Dependents

The more people rely on your income, the higher the amount of coverage you might need. Consider not just immediate family members but anyone who depends on you financially.

Debts

Any outstanding debts, including mortgages, car loans, or personal loans, should be factored into your coverage. The goal is to ensure your passing doesn't leave your loved ones with a financial burden.

Financial goals

Future financial goals, such as college funds for your children or retirement savings for your spouse, play a significant role in determining the coverage needed. These aspirations will require additional resources to fulfil in your absence.

Using a life insurance calculator

Given the complexity and the need to work out the coverage for your specific situation, using a life insurance calculator can be helpful. These tools take into account various factors, including your income, age, debts, and future financial obligations, to provide a personalised estimate of the coverage you need. By inputting your details, you can get a more accurate picture of the amount that would ensure your family's financial stability.

Connect with a wealth advisor

For a more personalised advice on how much coverage you should get, you can connect with one of our wealth advisors here.

Benefits of life insurance as safety net

There are several benefits to life insurance.

• You don’t have to worry about your loved ones’ expenses after your demise.
• Tax-free payouts: You don’t have to declare the payouts in your tax returns.
• Life insurance covers the funeral costs.
• Certain policies can also supplement your retirement savings.

Whatever the insurance coverage you should get, we want to get it at an affordable rate.

Starting from only RM9.75 a month, i-Care has death and total & permanent disability benefit. For an instant quote, visit here.