Cover needed to replace income and clear debts, less what you already have.
Cover needed
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Income to replace
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Existing resources
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Your breakdown
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Sizing cover by what your family would actually need
Buying a round number of life cover, say three million dollars because it sounds adequate, is guesswork. This calculator replaces the guess with a needs analysis. It adds up everything your family would have to fund if you died, then subtracts what they already have, and the difference is the sum assured worth insuring. The four building blocks of need are the income you want to replace for a set number of years, the outstanding mortgage, any other debts, and your children's future costs such as education. Against that it offsets existing life cover and liquid savings.
It is written for the main earner in a Hong Kong household, particularly families carrying a mortgage and raising children, where a death would leave dependants with both a lost income and a stack of fixed obligations. If nobody relies on your income and you have no debts, your need may be close to zero, and the tool will show that.
The needs formula, line by line
The logic is a single equation: income to replace, plus mortgage, plus other debts, plus children's costs, minus existing cover and savings. The income piece is your annual income multiplied by the number of years you want it covered, which is the lever with the biggest effect on the answer. Stretch the replacement period from ten years to twenty and the need can jump by millions, so set it to the point where your youngest child is independent or your partner could stand on their own.
A family on $600,000 a year with a $3 million mortgage
Run the defaults. Annual income is $600,000 and you want ten years replaced, giving $6 million. Add a $3 million mortgage, $200,000 of other debts, and $1 million of children's future costs. That totals $10.2 million of need. The family already holds $1 million of life cover and $500,000 of liquid savings, so $1.5 million is subtracted. The cover needed is $8.7 million.
The single largest block is the income replacement, not the mortgage, which is true for most working-age families. That is why the years-to-replace input deserves the most thought.
What the simple method leaves out
This is a clear-the-decks calculation, and it deliberately keeps things simple. It does not discount future income to present value, so it slightly overstates the lump sum needed, since money paid today could be invested to produce the replacement income. It also does not add ongoing living costs beyond the income figure, nor funeral expenses, nor inflation over the replacement years. Treat the result as a sensible upper guide and adjust to taste. On the Hong Kong side, the good news is that a life insurance payout to a beneficiary is not subject to estate duty, which was abolished in 2006, and there is no inheritance tax or capital gains tax on the proceeds, so the sum assured generally reaches your family intact. Confirm the treatment of any specific policy and your own circumstances with a qualified adviser.
A frequent error is forgetting to count an existing mortgage life policy or the death benefit attached to an MPF scheme as existing cover. If your lender required mortgage protection, enter it, or the tool will tell you to buy cover you already hold.
Should I include my MPF balance as a liquid resource?
With care. An accrued MPF balance does pass to your beneficiaries, so in principle it offsets the need. But it is locked in retirement savings rather than freely accessible day-to-day cash, and your family may need it for their own retirement. If you do count it, treat it as part of liquid savings only to the extent your survivors could realistically draw on it without wrecking their long-term security.
Is term or whole-of-life better for covering this need?
For pure protection of a temporary need, like a mortgage and child-rearing years, level term insurance gives the most cover per dollar of premium, because it has no investment element. Whole-of-life costs far more for the same sum assured but pays out whenever you die and builds a cash value. Many Hong Kong families use term to cover the big temporary need this tool sizes, and consider whole-of-life separately only for estate or legacy planning.