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Anonymous

Posted on 01 Jul 2020

How much coverage should I get for whole life insurance as a fresh grad?

Fresh grad with job paying ~3+k but paying off student loan. 200k sum assured was recommended by my agent (given my budget). But what are the other ways to calculate how much coverage do I actually need?

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5 answers

Discussion (5)

Hi anon,

Broadly speaking, $200K sum assured is a decent amount to start off with. I'd generally use the following guideline: 5 years of expenses (this is dependent on you) with a lump sum for out of pocket costs (usually around $100K). This usually ends up in the region of $160K-$180K for many people and hence $200K would be a decent amount, factoring in inflation over time.

The more important thing is to get CI cover because you lack it, and not because you were told to by someone. You are young and hence your insurability is still there. Over the years, as your life stage changes, you can review and re-visit your coverage, assuming you are still healthy.

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Hey there!

In general, these are the guidelines for specific coverages:

  • Death, TPD: 10x your annual income

  • CI coverage: 3-5x of your annual income

The guidelines are as such to cover for your essential working years and in the event you are unable to work, there is a form of coverage to provide for you in the unfortunate event CI strikes.

The assumption of course is that you are single. In the event you have liabilities and you are married with dependents, your needs will evolve and your coverage will have to increase. All the best!

Financial planning is an integral part of life. You can reach me here to find out more.

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Generally, life insurance coverage can be split into three life's major event,

  1. Pre-Mature Death

...

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