I tripled my life insurance. Is it enough?

Life insurance is a topic we generally avoid, which is why I never gave much thought to life insurance in my 20’s.  In fact, it wasn’t until we got married and had our first child that I started to look into my life insurance coverage.

Since we live on one income, I knew it was important to have appropriate coverage.  And after moving into a new house this summer and taking on a bigger mortgage, I felt I needed to top up my life insurance coverage.

Through my group policy at work, I tripled my life insurance coverage from $250,000 to $750,000.  Here’s what I did:

I already had mandatory life insurance coverage with my employer, with the option to purchase additional coverage in units of $10,000.  Since I’m under 35, insurance coverage is still fairly cheap.  At 58 cents per unit of coverage, topping up my policy to $750,000 only put me out of pocket by an extra $29 per month, and my total premiums are less than $45 per month.

But is that enough?  “Unfortunately, there’s never a perfect answer to how much life insurance you need,” according to Glenn Cooke of InsureCan.  “The standard practice is 10-20 times your income.  More if you’re younger, less if you’re older.”

The assumption is that you’re not insuring your life; you’re insuring your paycheque.  “Two income households should aim to replace 60 per cent of their income, and one-income families should look to replace 80 per cent of their income,” added Cooke.

There are also some ideas about insuring a stay at home spouse.  “First, you can look at roughly what it would cost to replace the duties of full time caregiver, chauffeur, cleaner, and cook until your children are out of the house,” said Cooke.

That’s if you decide to keep working.  “Alternatively, you would insure the stay at home spouse for as much as the working parent, should they want to stay at home full time and raise the kids on their own,” added Cooke.

In our case, we don’t have life insurance for my wife, but we’re considering a $250,000 term policy to give us the financial protection we need if our family were to become a one-parent household.

We are happy with the decision to triple my life insurance coverage.  It’s not quite on par with the insurance industry rule of thumb, but $750,000 is enough to pay off our mortgage and then cover about 15 years worth of expenses. 

Also read:

Why life insurance premiums are rising

How much life insurance do you really need?