How much life cover do I need?
There's no single right number, but a widely-used starting point is the LIFE method, which adds up what your family would actually need if you passed away, then subtracts the cover you already have. LIFE stands for Liabilities, Income replacement, Final expenses, and Education.
L — Liabilities
The debts that would need settling: your home loan, vehicle finance, and personal loans. Clearing these means your family isn't left servicing them.
I — Income replacement
The biggest piece for most people. The idea is to provide a lump sum that, invested sensibly, replaces the income your household relied on — for a chosen number of years (often until retirement). A common refinement is to base it on the household's expenses rather than gross income (a survivor typically needs around 80% of prior expenses), and to exclude debt repayments that are already covered under Liabilities, so you don't count them twice.
F — Final expenses
Immediate costs at death: funeral costs and the executor's fee (in South Africa, up to 3.5% of the estate's assets, plus VAT). Having cash for these means assets don't have to be sold in a hurry.
E — Education
The cost of seeing your children through school and tertiary education — often one of the largest long-term commitments a family has.
Putting it together
Add L + I + F + E, then subtract any life cover you already have. The gap is a guide to how much additional cover to consider. The figure is sensitive to assumptions — especially the investment return assumed on the income-replacement lump sum and the number of years you're replacing.