Is Your Insurance Coverage Enough?

In my line of work, I often hear phrases like “I already got insurance!“, “My insurance is already matured so I’m already thru with that“.

It’s just sad to know when I ask them, is your insurance coverage enough? Most of them would answer, ‘I don’t know’.  Others would say ‘yes I think so’. And still some would say ‘maybe’, ‘maybe not’.

Today, I’ll share you a simple formula that is very useful to know if you got enough insurance coverage for you and your family. It’s very simple that even a 5th grader can solve this formula very easily.

First and foremost, I must reiterate that the best reason why you would want to get life insurance is to protect your family. So most of the time, you’re getting life insurance coverage not for yourself (speaking to head of the families) but for your spouse and dependents, be it your wife, children and even parents. Second reason will then be, because you want to protect yourself when you grow older. Yes, you read it right, Y-O-U-R-S-E-L-F.

Contrary to the common belief that you’ll only get the benefit of Life insurance in case you die, then it’s about time to know that you can also benefit from your Life insurance policies even if you live too long after your retirement. In this case, this is called the Living Benefit (excluding Term Policies).

From where I came from, the idea of Life Insurance is not very well accepted simply because they don’t want to hear ‘death’. But if you can embrace the real concept of Life Insurance, then that’s the time that you’ll appreciate its worthiness.

The basic formula is this – it should be 5 to 10 times your annual income.

  1. Compute for your Annual Income.
  2. Multiply it by 5 and 10. For example, your monthly salary is P20,000.00, then your annual income is P20,000 x 13 months (including 13th month pay). Then your annual income is P260,000. We then multiply this to 5 and 10. That should give us P1.3Million and P2.6Million respectively.
  3. Then your Insurance coverage in case of death should be somewhere between P1.3Million and P2.6Million.

For a little more complex formula, try this one.

  1. Compute for your family’s monthly expenses. This can be obtained by assessing how much you spend for the electric bills, water bills, food, clothing, rent (if any). For example, a family of 3 would usually spend around Php20,000.00 per month.
  2. Multiply your monthly expenses by 12. This will determine your annual expenses. In our example, that would be [Php20,000.00 x 12 = Php240,000.00]
  3. In any case that the breadwinner will die, an income equivalent to Php240,000.00 has to replace his presence.
  4. Get the current interest rate of commercial banks nowadays. It should be closer to 3.75% per annum for time deposit. But for the sake of our computation, let’s round it off to 4%.
  5. Divide your annual expense to 4%. [ Php240,000.00 / 0.04  = Php6,000,000.00].
  6. That should give you your Life Insurance Coverage = Php6,000,000.00

Why is that so? The idea here is that, in case the breadwinner dies, his family will get Php6,000,000.00. If they will deposit the Php6,000,000.00 in a time deposit that gives 4% interest per annum, his family can then get Php240,000.00 per year or Php20,000.00 per month. The amount will be enough to cover their monthly expenses. That way, life continues. As they say, at least they would only cry once not twice.

And for the most complex formula, you can do this instead as shared by Randell Tiongson – Choosing the Right Life insurance for you

Go check and compute how much coverage do you really need for your family. Now you’ll know if you’re insurance is enough or very very short. If you feel that you cannot pay for the insurance coverage amount that will show up, try asking your agent for Term Insurance. It is by far the cheapest form of insurance providing the widest coverage.

In a recent survey, it is said that a person usually can accumulate up to 5-7 Life Insurance policies thru his/her lifetime. So if you already got one or two, its about time to check with your agent or other insurance companies and add some more under your belt.

What are the best value for money life insurance available in Sunlife? Try the following link below

  • VUL Insurance – Sun Maxilink Prime – for just P1,500.00 a month (depending on your age and profile), you can have insurance with investment plan
  • Term Insurance – Sun Life Assure – cheapest form of insurance. Just P500.00 a month (depending on your profile), you can be protected from 36 Critical Illnesses.
  • Guaranteed Endowment Plan – Sun Smarter Life – a little expensive but provides a guaranteed cash value and endowment benefit for lifetime.
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Garry Zaldy de Castro is an advocate, Financial Advisor, Certified Investment Solicitor (Mutual Fund Representative), blogger, IT practitioner, husband to Aileen and a dad to Jacob and JohnD. He started Financial Planning Philippines in 2008 just to share his financial learning to friends, relatives and anyone who wishes to be financially independent.


  1. JKasking, yep you’re right. Inflation wasn’t included in the computation yet. So that will be additional 6% on the average on a yearly basis. Thanks.

  2. WordPress is actually a whole lot like blogger/blogspot. You might want to try first at then if you already get the feel of it, we do provide cheap hosting for bloggers.

    Let me know if you need the pricelist –

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