Do you think one might be "over-insured"?

Hi Jun Kai,

This is a rather tricky question. While there are rules of thumb to guide how much insurance one needs, there are also instances whereby it is clear that someone is over insured.

Generally, insurers have financial underwriting guidelines to estimate what an individual can be covered for in terms of the amount of coverage. So, someone aged 25 earning $50K/yr could not buy a $5M policy (affordability aside) because that would not make any sense. But a $2M policy, while it may seem excessive, can be purchased.

Ultimately, if you are not spending more than 10% of your income on coverage, you are probably not over-insured. There's no way to calculate to the dollar how much coverage you'll need, but 10 x annual income for death/TPD cover and 5x annual income for CI coverage would be a good starting point. This has to be adjusted for the individual's circumstances, however, since everyone's scenario is different.

Yes definitely, depending on what assets the individual has. But a must insurance for anyone, would be a health insurance.

My term of over-insured, is when you’re insuring yourself with something you have already insured or incurring unnecessary cost after purchasing that particular insurance.