How much life insurance do you actually need?

“Am I over-insured or under-insured?” is one of the most common questions I hear — usually from people who bought a policy years ago and never revisited it. The honest answer is that a number pulled from a brochure means very little. The right amount of cover is the amount that keeps the people who depend on you financially whole if your income suddenly stops.

Here's a simple framework you can work through in ten minutes.

Start with what your family would actually need

A useful shorthand is sometimes called DIME — four things your cover should be able to settle:

• Debt — outstanding mortgage, car loan, renovation loan, any personal loans.
• Income — the years of income your household would need to replace. A common starting point is 5–10 years of your annual income, depending on how long your dependents need support.
• Mortgage — if not already counted under debt, your home loan is usually the single largest number.
• Education — the cost of seeing your children through to the end of their studies.

Add these up. That total is roughly what your dependents would need to carry on without financial shock.

Then subtract what you already have

You are rarely starting from zero. Deduct:

• Existing life insurance (personal policies and any group cover from your employer).
• CPF savings that would be distributed, and any DPS (Dependants' Protection Scheme) cover.
• Liquid savings and investments your family could draw on.

What's left after subtracting is your protection gap — the shortfall real cover is meant to fill. Many people find the gap is smaller than a salesperson implied, and some find it's alarmingly large. Both are useful to know.

Don't confuse the different jobs insurance does

Life (death) cover replaces income. But two other risks derail plans just as often:

• Critical illness — a serious diagnosis can stop your income and add costs, often years before retirement.
• Disability / TPD — losing the ability to work has the same financial effect as death, without the reduced expenses.

Sizing these well matters more than piling everything into one big death-benefit policy.

The goal is “enough,” not “maximum”

Over-buying cover you don't need is a real cost — premiums are money that could be protecting other gaps or funding your goals. The aim is precise cover matched to your obligations, reviewed as life changes: a new mortgage, a new child, a pay rise, or a loan paid off all shift the number.

Cover should be sized to your life, not to a product. Get the obligations right, subtract what you hold, and protect the gap.

If you'd like a second opinion on where your gap sits today, that's exactly what the first two of my three meetings are for — understanding your situation and mapping it out, before anything is ever recommended.