Most people are either under-insured or overpaying for their life insurance in Singapore. The difference between having too little coverage and having the right amount can mean hundreds of thousands of dollars in financial security for your family. In this guide, we break down exactly how to calculate the coverage you need based on your unique situation.

Why Getting the Right Amount Matters

Being under-insured means your family may struggle to maintain their lifestyle if you are no longer around to provide. Being over-insured means you are paying premiums for coverage you do not realistically need — money that could be invested or used for other financial goals.

The DIME Method

A practical framework used by financial advisors is the DIME method:

• Debt — Total outstanding loans (mortgage, car, personal loans)
• Income replacement — Annual income × number of years your family depends on it (typically until youngest child turns 21 or until spouse retires)
• Mortgage — Outstanding home loan balance
• Education — Estimated university costs per child ($80,000-$150,000 in Singapore)

Add these together, then subtract existing assets and insurance coverage to find your gap.

Example Calculation

Consider a 35-year-old earning $80,000/year with:

• Mortgage outstanding: $400,000
• Other debts: $30,000
• Two children aged 5 and 8
• Spouse working part-time

Using the DIME method: Income replacement ($80,000 × 15 years = $1,200,000) + Mortgage ($400,000) + Other debts ($30,000) + Education ($100,000 × 2 = $200,000) = $1,830,000. After subtracting CPF savings and existing group insurance, the ideal coverage might be around $1.2-1.5 million.

Additional Considerations

• Inflation: $1 million today will not have the same purchasing power in 20 years. Consider increasing coverage over time or choosing policies with inflation protection.
• Critical illness: Life insurance alone does not cover you if you survive a stroke or heart attack but cannot work. A separate critical illness plan is essential.
• Dependents: As children grow up and mortgages are paid down, your coverage needs decrease. Review every 3-5 years.

Bottom Line

The right amount of coverage is not about picking a round number — it is about protecting your family's financial future. Use our calculator or speak with one of our advisors to get a personalised assessment based on your actual income, debts, and family situation.