How Much Life Cover Do I Need?

news Oct 19, 2017

How Much Life Cover do I need?

Planning for your financial future will give you peace of mind today. This week, our Expert
Qualified Financial Adviser, Eoin Liston, Premier Financial Services, discusses how Premier Financial determines how much life cover you need.


This is probably the most common question financial advisers get asked and in a lot of cases the standard answer would be insure somewhere between 6, 8 or 10 times your salary.
The truth is unless you have an in-depth knowledge of an individual’s current financial situation, their family/dependants and their lifestyle and financial goals it is not possible to calculate the correct amount for Life Cover.
There are a number of highly effective methods of calculating the amount of life cover needed if you have dependants .
1. The Human Capital Method
This method is a simple mathematical equation, we can calculate the present value of every after-tax Euro you would earn between now and when you would retire and we simply insure that amount.
This is probably the most accurate way of calculating how much your family would lose if you died, but it can make things quite expensive as it doesn’t take into account other sources of income that may be payable in retirement or your families reduced costs as your mortgage for example would be cleared.
2. The Expenses Method
This method quantifies your family’s current annual expenses and then puts enough cover in place for this amount until you retire.
Although this is a good method for calculating life cover, it doesn’t take into account other sources of income which can be used to fund your family’s lifestyle.

3. The Premier Financial Method

• We will calculate your current net annual earned income
• We then account for the state widowers pension which would be due to your family if you die, or any other income you have e.g. rental income.
• Next, we reduce this by the value of your annual mortgage repayments which are to be cleared on death.
This gives us an annual income figure that your family will need to fund their lifestyle until retirement without over/under insuring you as the 2nd and 3rd method tend to do.

Each individual’s circumstances will determine which type of protection option meets their needs, but whichever route you chose, all it’s really about is putting life cover in place to ensure that the necessary funds will end up in the right hands at the right time, in both a cost efficient and a tax efficient manner. We advise that you seek professional advice as the information given is a guideline only and does not take into account your particular circumstances.

Premier Financial Services is a registered trade name of PCS Financial Services (Kerry) Ltd. PCS Financial
Services (Kerry) Ltd. T/A Premier Financial Services is regulated by the Central Bank of Ireland


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