Life insurance and children: how to do the maths

20 Apr 2025

Once you have children, there are more variables to consider when taking out life insurance

Question: We will be having our first baby soon and I think it’s about time I took out some life insurance. How do I work out how much life insurance I should get?

Answer: The short answer is that you should take out enough cover to ensure that your family remains on the same financial trajectory they are currently on even if they will no longer be receiving your monthly salary because you have passed away.

In the days before children, you’d need enough life insurance to cover:

Any debt you have;

Your final expenses; and

Your contribution to the fixed household expenses.

This is generally not a large number.

Once you have a child, things change and the number increases significantly because you also need to cover the following:

Your salary until the child is a self-sufficient adult. I generally work on covering your salary until the child turns 25.

Any additional costs that your spouse would have as a single parent. They would vary from household to household but could include items such as after-care and transport costs.

You may also want to include cover for tertiary education for your child.

To give you an indication of the amount of cover you could need, look at the following situation. The parent earns R40,000 a month and has a bond of R1-million. (See the table below.)

As you can see, covering your future salary for the next 25 years adds the most to your life insurance needs.

As you get older, the number of years you need to cover your salary for will reduce, so you could reduce your life insurance cover. This is why it is important to review your finances every year. And remember, if you have another child, the term for which you will need cover for your future salary would increase until that child is 25.

Insider tip

When you take out life insurance, you can also purchase future cover. This will allow you to increase the amount of cover that you have without needing additional medical underwriting in the future.

As we get older, we often develop medical problems that can result in our being refused life insurance or having to pay much more for it. If you take out the additional future cover benefit, you will pay a small additional premium immediately, but you will be guaranteed additional cover in the future.

Premium patterns

When you take out life insurance, you need to understand why you’re taking it out and for how long you intend to have the cover.

If you want to keep the insurance for your whole life, choose a premium pattern that is either level or that increases by a fixed amount such as 5%.

Doing this will ensure that the cost of your life insurance does not increase by a lot more than your pension will increase when you retire.

The other type of premium increase is age-rated premiums, which become very expensive as you get older. I generally find that from the age of 55, these age-rated premiums double every six years.

So, if you’re young and just want to cover your risk for a limited period, age-rated premiums would work for you.

However, if you want to keep the life insurance for your whole life and use it as a form of inheritance for your children, you should look for a level or fixed increase to your life insurance.

These principles should provide you with a decent framework to evaluate any life insurance proposals. DM

Kenny Meiring is an independent financial adviser. Contact him on 082 856 0348 or at financialwellnesscoach.co.za. Send your questions to [email protected].

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R35.

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Insider tip

Premium patterns