How much insurance coverage do I need?
How much insurance coverage do I need? Get the exact number you should buy today.
Stop guessing. Get a coverage number that protects your family and assets
Most people buy the wrong amount of insurance. Too little and you risk financial ruin. Too much and you waste premium dollars. Here’s a direct, no-fluff plan to calculate the right insurance coverage for life, home, auto, and business risk.
Start with a clear goal
Define what you want the policy to do: replace income, pay debts, restore your home, cover medical bills, or protect savings. Your coverage must match the goal.
Simple step-by-step method to calculate coverage
- List liabilities and future needs
- Debts: mortgage balance, car loans, personal loans.
- Ongoing expenses: annual household spending x years (use 10–25 years for life insurance).
- Future costs: college, major medical, funeral.
- Add a safety cushion (20–30%)
- Unexpected costs and inflation. Multiply the subtotal by 1.2–1.3.
- Subtract existing resources
- Savings, investments, employer life benefits already in place.
- Net need = Required coverage – available resources.
- Choose policy types to match need
- Term life for pure income replacement.
- Whole or permanent life for estate planning and long-term needs.
- Home insurance at replacement cost, not market value.
- Auto: liability limits + collision/comprehensive for asset protection.
Quick examples you can use
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Life insurance: $60,000 annual household expenses x 15 years = $900,000. Add 25% cushion = $1,125,000. Subtract $125,000 in savings = $1,000,000 needed.
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Home insurance: If rebuilding your house costs $500,000, buy replacement-cost coverage for at least $500,000 plus $100,000 liability cushion.
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Auto insurance: If you own $40,000 in assets and want strong liability protection, consider 300/500/100 limits or an umbrella policy with $1M liability.
Special risks to cover
- Disability insurance: Replace at least 60% of earned income.
- Critical illness: Cover medical gaps not paid by public insurance.
- Business owners: Buy key person, business interruption, and commercial liability coverage.
Practical rules of thumb
- Life: 10–20x your annual income or the DIME method (Debt, Income, Mortgage, Education).
- Home: Replacement cost + liability equal to at least 20% of home value.
- Auto: Minimum state/provincial limits + umbrella for assets.
- Disability: 60% of gross income, with benefits lasting to retirement age.
Final checklist before you buy
- Run the numbers using the steps above.
- Compare replacement cost vs market value for property.
- Confirm policy exclusions and deductibles.
- Shop multiple insurers and bundle discounts.
- Consider an umbrella policy for catastrophic liability.
Tony Sousa is the local expert in insurance and risk management. If you want a fast, exact coverage plan tailored to your situation, email tony@sousasells.ca or call 416-477-2620. Visit https://www.sousasells.ca for free tools and a one-page insurance checklist.
Act now. Get the right coverage. Protect the life you built.
