Life insurance is more than a necessary safety net. It is putting your family first and thinking ahead in the case of eventualities. No one knows what is going to happen in future, and no family should have to bear the burden of such uncertainties. This is why having a great life insurance policy helps you to ensure that your family is provided for when your are gone.
Many women often think that they do not need a life insurance policy. However, that line of thought is so far from the truth. Before your demise, you contributed to the household either as a career woman, financially or as a housewife, by taking care of the children. When death occurs, someone needs to feel that gap. More strain is put on the husband to become the sole provider or even become pay for the services of a live in nanny. In essence, it would cost more money to fill your role. Taking care of these expenses, burial costs, cost of feeding the children etc would take a strain on the pockets of the husband, hence the need for a life insurance.
A number of people ask the questions, “how much life insurance do I really need”? The answer is largely dependent on the packages offered by the insurance company eg FBNInsurance. However, it is great to have an educated guess of how much life insurance is good for you and your family before approaching the insurance company.
There are a lot of online calculators to assist you in determining the answer to this question. However, there are also smart simplified methods which you can use. These methods provide an estimate of how what you should have in mind when approaching the insurance company.
A man earns N500,000 per month and wants to take a life insurance policy that can cater to his family in the event of his death. Yearly, his total income amounts to N6,000,000, out of which N4,000,000 is used for his family’s expenses yearly.
|Funds Required by Your Family Should You Die||Yearly or One-Time Expenses||Balance Needed for Life Insurance|
|Your Family’s needs for next ___years||3 years x N4,000,000 = N12,000,000||N12,000,000|
|University for _2_ child(ren)||N10,000,000||+ N10,000,000|
|Funeral Costs||N1,000,000||+ N1,000,000|
|Total Overall Costs||N23,000,000|
From the diagram above you can see that income used is his monthly income multiplied by 12 months. Also, university fees for his children who may be end up schooling in a private university in Nigeria is also calculated. Our case study may have assets with his spouse, and what he would do in this case is to subtract the value of those assets which he and his spouse have already accumulated from the final balance. If you have loans which need to be paid, such loans should also be added to the final balance.
Hence, the formula is basically to calculate an estimated value of your life insurance will be your family expenses for a given number of years plus the amount of money to be used in sponsoring your children’s university education plus loans owed minus value of accumulated assets.
It is also important to note that this exercise is usually the first step to getting a life insurance package, because it helps you get over the mental hurdle.