“How much coverage is enough?” is one of the most common questions asked by someone considering life insurance. The problem is, there isn’t really a universal solution for everyone – rather, it depends on a wide range of factors, including your age, income, expenses, dependents and overall financial status.
According to CNN Money, one rule of thumb people consider is to purchase a policy where the death benefit is 7-10 times the amount of their annual salary. However, CNN quickly recognizes that this rule of thumb is just that – it lacks accuracy.
A more appropriate approach is to look at it from the reverse perspective – how much in household expenses your dependents need you to cover and approximately how long. In a Gen Y Money Q&A, The Globe and Mail explored a scenario with this approach: “…if your family needs you to cover at least $2,800 a month of household expenses to maintain their lifestyle for the next 20 years, you would need $500,000 of life insurance coverage, assuming a 5-per-cent after-tax rate of return and 2-per-cent inflation.”
If you’re considering life insurance, you’re on the right track. Educators commonly pay less attention to their finances than many professions due to considerable pensions and benefits available to most Canadians working in education. However, while most Canadian educators, administrators, support staff and their families are often provided with robust, reliable pension and benefit packages, these are often not enough.
While shopping for life insurance that complements your current coverage, consider trying our Needs Analysis Calculator – our latest interactive calculator that helps you determine how much additional coverage you require above your current coverage, based on your current financial situation.
Once you’ve used our Needs Analysis, consider checking out our various life insurance plans here.