How much life cover does a Nigerian family actually need?

Life insurance is sold with round numbers — ten million, twenty million — because round numbers are easy to quote. They have nothing to do with what your household would actually need. Here is a way to reach a figure you can defend.

Work out the four numbers

1. 1Income replacement: what your household needs each year, multiplied by the number of years it would take them to become self-supporting. For young children, that can be fifteen years or more.
2. 2Debts that would not disappear: mortgage, car finance, business loans you personally guaranteed.
3. 3One-off costs: funeral expenses, and any immediate family obligations.
4. 4Education: school and university fees still to come, at today's cost.

Add them together, then subtract what already exists — savings, existing cover, any group life your employer provides. What is left is the gap.

A worked example

A household needs ₦4m a year and has two children aged 6 and 9. Say ten years of income replacement: ₦40m. Outstanding car finance of ₦3m. Remaining school fees estimated at ₦12m. Total need: ₦55m. Employer group life covers ₦9m and savings cover ₦4m, so the gap is around ₦42m.

That figure is arguable — you might use eight years, or fifteen — but it is reasoned, which a round ₦20m never was.

Term or whole life?

Term life covers a fixed number of years and builds no savings, which makes it dramatically cheaper for the same sum insured. Whole life lasts your lifetime and accumulates a cash value, at considerably higher cost.

For most families with dependent children, term cover sized to the real gap does the actual job — protecting people during the years they cannot protect themselves. Mixing protection with savings usually means buying less protection than you needed.

Practical points

• Name your beneficiary, and update the nomination after any marriage, birth or death
• Tell someone the policy exists — unclaimed policies are more common than they should be
• Answer health questions completely; non-disclosure is the main reason life claims are refused
• Review the figure every few years, or whenever your circumstances change materially