How Much life insurance do we really need?


Before I took the Registered Financial Planner’s course back in 2012, I had no idea why there’s need for people to get insured. I was clueless what life insurance is until a friend offered me one and I was too shy to say “no”.

During our insurance planning session, I still wasn’t sure if there’s really a “need” for insurance. Our instructor though thought me how valuable life insurance is after he compared a car to our life.

He asked us, “Which is more valuable, your car or your life?” He then proceeded, “If you drive a car and your car is insured, what reason should the driver have for him not to be insured?” That’s when I started to understand the purpose and value of life insurance.

What surprises me now is how we financially value our life. I use the same car versus life analogy when I talk to clients. It’s surprising how people feel that a P100,000 coverage is enough for their insurance needs. Is that really how much our lives are worth?

There are people who insure two to three of their cars but they themselves are underinsured. How then can we determine the amount of life insurance coverage?

Income Protection needs

One main purpose of life insurance is income protection for our family. Proceeds of life insurance can replace whatever income is lost after our passing. The question now becomes how many years after our passing would we want our family to receive income to allow them to go on with their lives with the same lifestyle when we were alive.

Usually, I advise clients to have at least five years’ worth of income protection. This would allow our families ample time to financially adjust to the new situation.

Debt protection coverage

Are you paying for a loan? How much is the total amount of all your loans? When we die, I’m sure we don’t want our families to suffer losing your home because they don’t have money to continue our mortgage payments.
We can include debt payment to our coverage so our beneficiaries can settle all the loans and live on without financial worries.

Education protection coverage

I’m sure our children’s education almost always ends up on top of the list even if it shouldn’t be the priority.

The amount of coverage for our children’s education may vary. You can get the total projected college tuition for all your children or you can compute for total education costs from whatever level they are in now up until college.

Estate tax coverage

If one owns properties or assets held by banks or other financial institutions, he must have estate tax coverage to ensure beneficiaries can pay the required tax obligations and fully claim all of the insured person’s assets. This can vary depending on the volume of the assets.


Jeremy Jessley Tan is a registered financial planner of RFP Philippines. To learn more about personal financial planning, attend the 72nd RFP program this October 2018. To inquire, email or text <name><e-mail><RFP> to 0917-9689774.


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