Cover needed to protect dependants, on an income-replacement basis.
Life cover needed
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Income to replace
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Employer group-life floor (3x)
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Putting a number on what your family would need
Life insurance is not about you, it is about the people who depend on your income. The hard question is how much cover is enough, and guessing leaves your family either underinsured or paying premiums for cover they will never use. This calculator answers it with an income-replacement approach: it works out the lump sum that would let your dependants keep going for a set number of years, clear your debts, cover your funeral and final costs, and then trims that by the cover and liquid savings you already have.
This is a financial-planning estimate, not a tax computation, so it is not something the Federal Inland Revenue Service assesses. That said, tax does brush against it: life insurance premiums you pay can be a deductible relief against your personal income tax under the structure modelled elsewhere on this site, and a properly arranged policy payout to your beneficiaries is generally received free of tax. Confirm the current relief treatment of premiums with the Federal Inland Revenue Service if that is part of why you are buying.
The build-up, line by line
The logic stacks four needs and subtracts two resources. Income to replace is your annual income multiplied by the years of support, the years your household would still lean on that paycheque. To that the tool adds outstanding debts, so loans do not land on your family, and final expenses for the funeral and immediate costs. From the total it subtracts any existing life cover and your liquid assets, since both could be tapped first. The result is the fresh cover you still need, floored at zero.
A breadwinner with young children
Take someone earning NGN 6,000,000 a year whose family would need support for 10 years, carrying NGN 5,000,000 of debt, with NGN 2,000,000 set aside for final expenses, NGN 3,000,000 of existing cover and NGN 2,000,000 in liquid savings. Here is how the calculator assembles the cover figure.
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Income replacement dominates the figure, which is why the years of support you choose matters so much. The chart above the editorial shows the same build-up as an interactive breakdown.
The cover your employer already owes you
Many Nigerian employees overlook a floor that sits underneath all of this. Under the pension legislation, an employer is required to maintain group life cover of at least three times an employee's annual total emolument. The tool shows that floor using your income as a proxy for emolument, so on a NGN 6,000,000 income the employer group-life floor comes to NGN 18,000,000. That is real cover your family can claim, but it is not a substitute for your own planning. It is tied to that job, it usually ends when the employment ends, and three times salary rarely matches the full income-replacement need this tool computes.
The practical move is to treat the group-life floor as a base layer and buy personal cover to bridge the gap up to your real need. In the example, the NGN 18,000,000 employer floor plus the NGN 3,000,000 existing personal cover still leave a large shortfall against the NGN 62,000,000 the tool calculates. Because the exact group-life multiple and how emolument is defined can change with the rules, confirm the current requirement, and ask your employer for written confirmation of the actual sum assured on your group scheme.
Who this calculator is for
It is for anyone with people who rely on their income: a sole earner with children, a parent supporting an elderly relative, a spouse whose loss would tip the household budget into the red. If nobody depends on you financially and you have no debts that would burden others, your need may genuinely be close to zero, and the tool will show that. A common mistake is buying cover sized to your salary out of habit rather than to your dependants' actual needs, so let the years-of-support figure reflect how long your family would really need help, not a round number.
Should the cover grow with inflation?
It should be reviewed. This calculator gives a snapshot in today's naira, and with Nigerian inflation high, a sum that looks ample now can fall short in a decade. Some policies offer escalating cover that steps up each year. If yours does not, revisit this calculation every couple of years, and whenever your income, debts or family situation changes, so the cover keeps pace with what your dependants would actually need.
Does a payout to my family get taxed?
Life insurance proceeds paid to beneficiaries are generally received free of tax in Nigeria, which is part of what makes cover an efficient way to leave money behind. The premiums you pay may also qualify as a deductible relief against your own income tax while you are alive. Both points can be affected by the ongoing tax reform, so confirm the current position with the Federal Inland Revenue Service before treating the tax treatment as settled.