Life insurance: do you need it and how much is enough?

If there’s one certainty in life, it’s that there are no certainties. While it’s easy to keep putting off big decisions, it’s more prudent to discuss them with your partner or family – especially when it comes to their future financial security.

Life insurance: do you need it and how much is enough?
Photo: Getty Images

Life insurance is one such issue that it can be tempting to leave at the back of your mind. However, in order to best prepare your loved ones for any eventuality, it pays to understand how life insurance policies work. Here, with international insurance broker ASN, we present a brief guide to the main types of coverage available, and how to work out how much you should be covered for. 

Think you need life insurance? Find out how ASN can offer solutions tailored for you 

What kind of life insurance do you need?

Life insurance policies fall into two broad categories, each with their own benefits.

Term life policies: you pay a premium for a set ‘term’ or period of time, such as 10 or 20 years for example. During this time, should you pass away, a set amount of money is paid out to your family. Once the term is up, however, you’ll need to take out a new term life policy if you want to remain covered. With term life policies, you benefit from having more flexibility to easily alter your plans and the amount you pay.

Whole life policies: these policies work by taking part of the premiums you pay each month and investing them, without a set term. This makes the value of your policy grow over time. This value can be reinvested to pay for premiums. Alternatively, you can ‘surrender’ it at a certain point, with a large payout to live on, say on retirement. But this is not a decision to be taken lightly, as this means giving up the policy and the potential death benefit. Whole life policies have the benefit of accumulating far more value over time and ensuring that any payout will cover all costs. 

Planning for your personal circumstances

When looking at the types of life insurance, consider your own individual circumstances. If you’re younger and working overseas, perhaps a term life policy is more appropriate, as your circumstances may change. If you’re older and more established, with a growing family, a whole life policy may better suit your needs. 

Remember, also, that the cost of a policy tends to go up as you get older – especially if you develop new health conditions. It makes sense to discuss the topic with your partner sooner rather than later as part of your joint financial planning.

Through an international insurance broker like ASN, you can find life insurance policies tailored for you and your family’s needs. Benefits include the option of single or joint policies, cover for terminal illness and accidental death, and your choice of currency.Photo: Getty Images

Learn more about the benefits of life insurance for you and your family with ASN

How much life insurance do I need? 

Once you’ve decided what kind of life insurance policy would suit you better, you’ll then want to work out exactly how much coverage you’ll need – one size definitely does not fit all. To do this, financial experts have come up with the DIME formula to calculate an appropriate level of cover based on four factors: debt, income, mortgage and education.

Debt: this is self-explanatory. Even if something should happen to you, your family will still be responsible for any debts that you may owe. So, grit your teeth and gather your credit card statements and other ongoing bills together and add this amount together. This is the amount that would have to be paid out to settle your debts. Life insurance can ensure that debts and legal fees are handled, supporting your family when they need it most.

Income: the money you make to support yourself and your family each year. You need to make an educated guess as to how long your family would need the equivalent of your salary without you – should you multiply your annual salary by five, ten, or even more?

If you’re married with no children, you might only need five years’ worth of salary to ensure your spouse is taken care of. If you have children, it would be good planning to ensure the amount covers the expenses of raising them up to the age of 18. 

Mortgage: if you’ve got a mortgage, or mortgages, gather the documents or statements together and find the payout amount – that is to say, the amount needed to pay them off completely. If you own properties in multiple countries that use different currencies, remember to do a quick calculation based on the exchange rate and come up with a single figure. 

Education: if you have children – or plan to have children – you may also want to consider the potential cost of higher education. In some countries, it’s free or heavily subsidised. But what if you live elsewhere, might move to a new country or just want to give your child the possibility of studying in the US, for example?

Then figure out the cost of the average degree in the country or countries where they’re likely to study and put that down. You might also want them to receive a private school education – if so, you need to add the fees to your estimated costs too. 

Once you have a total figure from these four factors, you have a good idea of your life insurance need. You may also want to subtract existing savings you could tap for expenses, however, to make sure you’re not over-insured.

Then you can go ahead with taking out your choice of fixed term or whole life policies, knowing that whatever the future holds, your loved ones will be supported, safe and set up for the future. 

Find out more about the comprehensive and flexible solutions ASN offers in partnership with some of the world’s best life insurance providers. Benefits include a single or joint policy and your choice of currency.

For members


EXPLAINED: Why you need ‘legal protection insurance’ in Switzerland

Swiss insurance companies offer a variety of services, but the one covering legal disputes is among the most popular ones. This is what you should know about it.

EXPLAINED: Why you need 'legal protection insurance' in Switzerland
Law and order: Legal insurance may make it easier. Photo by Sora Shimazaki from Pexels

The Swiss like to be prepared for all kinds of disasters — both real and imaginary.

This is where insurance comes in.

Whether it’s a policy that covers damages inflicted on cars by weasels, or insurance for theft of sleds and skis placed outside a mountain restaurant, people here don’t like to leave anything to chance.

One of the most popular optional coverages — as opposed the health insurance, which is compulsory — is legal protection insurance (Rechtsschutzversicherungen in German, protection juridique in French, and protezione giuridica in Italian).

What is it and what does it cover?

Simply put, it covers attorney and other associated fees if you undertake court action against someone, are sued, or simply need legal advice.

There are two different types of legal protection insurance — one specifically for traffic accidents and the other for all other matters. Sometimes they are combined.

Typically, this insurance covers costs of legal representation associated with contract disputes, employment, loans and debts, healthcare, housing, retail purchases, and travel.

Photo by Rodnae Productions from Pexels

Some carriers also insure cases related to marital law and inheritance.

Most will not cover attorney fees for criminal cases where you are the perpetrator, or financial disputes related to asset management, banking and investment.

Also excluded is legal action related to political or religious activism.

Can you choose your own lawyer or will you have one assigned to you by the insurance company?

Typically, an insurer has a roster of approved attorneys with whom it works. Some allow the client to choose from the list, while  others select one for you.

If your own lawyer is part of your insurer’s roster, you can request he or she represents you, but it is not guaranteed.

How much does this insurance cost?

Fees vary depending on what coverage you need (traffic accidents, general, or combined), whether they have deductibles, and how high they are.

You can compare the premiums by using this link.

Do you actually need this coverage?

As is the case with any optional insurance, you don’t need it until you do.

Generally speaking, and according to online consumer comparison site, “if you require legal consultation at least once every two years, getting personal legal insurance often makes financial sense. Just the legal consultation benefits which you get with some insurance policies can make up for the cost of premiums”.

READ MORE: How much does health insurance cost in Switzerland?