The Cost Of Not Having Life Insurance

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For much of our lives, it is something we fail to even consider.  But then sometimes even overnight we experience just one event that changes our perspective completely.  The birth of a child, the wake-up call of close friend’s death, or perhaps even a more personal close encounter with life-threatening illness or accident; these are all catalysts for considering the need for Life Insurance.

life insurance protection for international families in JapanOften the big question is: how much life insurance do I need and what type?  The simple answer is that there is no simple answer.  The exact amount depends entirely upon a host of details of an individual’s specific financial and personal situation.  Fortunately however, here are a few general rules of thumb:

The primary purpose of life insurance is to protect your family in the event of your untimely death or disablement.  If the main income earner of the family is no longer in the picture, studies in the UK have shown that 10-12 times their annual earnings is typically enough to sufficiently support the family.

how much life insurance should I have for my family?

That being said, not every family is the same. For example, a man with one 15 year old son has a much smaller financial liability than a father of 3 children under the age of 6. Another simple rule of thumb is to add up the sum of 2,000 per month, per child until each child is 18.  Of course the exact cost per month will vary, but this simple computation turns out to be a quite accurate estimate more often than not.

While rules of thumb are convenient, we understand that some people prefer to crunch the numbers and get a solid estimate of total cost of supporting a family.  In depth statistical research by the UK Centre for Economic and Business Research puts out an annual report computing the average cost of raising a child through to adulthood.  In January 2014 they determined this number to be 227,266 GBP (~380,000 USD).  Raising a family overseas, as well as sending them to above-average costing school and university drives the total cost even higher…

After putting together an estimate of a suitable death benefit amount, an individual will need to decide on Term or Whole of Life (also called permanent insurance).  This is also very case-by-case depending on the individual’s requirements, age, etc.

Another option to consider is that of Critical Illness Insurance.  Modern medicine is improving every year at enabling us to survive heart attacks, cancer, accidents, etc. The downside to this though, is that often an individual will experience a critical event that will prevent him from supporting his family for extended periods of time (or permanently). But, he has survived the event so his life insurance death benefit will not pay out to the family…

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In this case, setting up critical illness coverage along with a standard life insurance plan would give you the peace of mind of knowing that your family’s future will be secure no matter what life may throw your way. We understand that all the decisions to be made for life insurance can be a bit daunting, but having an experienced professional walk you through the different amounts, types, and options in person can make the whole process easy to understand.

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Sources and Further Reading

- “Cost of a Child” Centre for Economics and Business Research 2014

- www.cancerresearchuk.org, 5-year relative survival, adults aged 15-99, England, 2005-2009 and followed on to 2010, February 2014

- www.cardiacmatters.co.uk, Facts about heart attacks in the UK, February 2014