How Much Coverage? 9x for Death, 4x for Critical Illness

How it works

• In October 2023, MAS launched the Basic Financial Planning Guide with the Association of Banks in Singapore (ABS), the Association of Financial Advisers Singapore (AFAS) and the Life Insurance Association, Singapore (LIA), summarising emergency funds, protection, investing and legacy planning in a few simple rules of thumb.
• The coverage multiples in the Guide are based on the LIA Protection Gap Study and calculated on annual income. They suit most people; those with more dependants or higher debts may want more coverage, and others less.
• The Guide is not a regulatory requirement and does not replace a personal needs analysis; for planning that fits your circumstances, you can speak with a financial adviser representative.

Rules of thumb

Item	Rule of thumb	Basis
Emergency fund	At least 3–6 months of expenses (about 12 months if income is irregular)	For sudden costs such as medical incidents, job loss or replacing appliances; must be readily accessible
Death and total permanent disability	9 × annual income	What dependants (and the insured, for permanent disability) need to cover expenses, clear debts and maintain a reasonable lifestyle for a period of time
Critical illness	4 × annual income	Family expenses and debt repayments during an assumed recovery period of about 5 years, allowing for reduced earning capacity
Protection premiums	At most 15% of income	Based on income after CPF contributions; bundled products (such as whole life insurance) may exceed this
Investing	At least 10% of income	Based on income after CPF contributions, for retirement and other financial goals

Estimating a protection gap

• Mortality protection gap: what dependants need (expenses, clearing debts, maintaining a reasonable lifestyle), less existing savings (including CPF and other savings) and existing death coverage.
• Critical illness protection gap: expenses and repayments needed during an assumed 5-year recovery period, less existing critical illness coverage.
• The LIA Protection Gap Study 2022 found that economically active people had average death coverage of about 3.6 times annual income and critical illness coverage of about 2.1 times; the overall mortality protection gap was 21% and the critical illness protection gap 74%.
• This website’s financial planner lists reference coverage based on the rules of thumb and compares it with the existing coverage you enter.

Usually suitable for

• Individuals and families who want a rough idea of how much coverage they need
• People checking whether existing policies match their income and family responsibilities

Risks to note

• Looking only at multiples can overlook a family’s actual situation, such as the outstanding mortgage, children’s ages, a spouse’s income and existing savings.
• Existing protection such as group insurance and the CPF Dependants’ Protection Scheme (DPS) should be counted, to avoid overlaps or gaps.
• Underwriting conditions and premiums may change with age and health.

Questions to ask

• Given my annual income, debts and dependants, roughly how far am I from the rules of thumb?
• What are the sums assured and coverage terms of my existing policies, including group insurance?
• Are my premiums within 15% of my income?
• How often should I review my coverage after changes in income or family circumstances?