Skip the round number
A lot of people pick a life insurance sum insured because it sounds like enough — half a million, a million. It's easy, but it's not sizing. Life cover is a specific number: what would your family actually need if your income stopped tomorrow?
The useful way to think about it is a needs analysis. Add up what your family would need to be okay financially, subtract what already exists, and the gap is your cover.
Debts you'd want cleared
Start with the mortgage. For most families, clearing the home loan is the single biggest thing that keeps the household stable. Add any other significant debt — car finance, personal loans, credit cards.
The reason this matters is that debt payments don't pause when a household loses an income earner. Removing them removes the biggest ongoing pressure.
Income replacement, for how long
Then think about how long the surviving partner would need income support. If the kids are 3 and 5, that's a longer runway than if they're teenagers. If the surviving partner works full-time and could keep going, the number is smaller than if they'd need to be at home more.
A common approach is to cover a set number of years of income (five, ten, or through to when the youngest child is independent), invested to produce roughly the same monthly amount as your take-home pay.
The costs nobody budgets for
Funeral costs. Legal and estate costs. A period where the surviving partner reduces work hours to be present with children. Childcare that was previously handled by the person who's gone. Home maintenance that used to be DIY. These all add up and they get forgotten in DIY calculations.
You don't need to precisely price each one. A sensible buffer above the mortgage and income figure covers the reality that grief and change cost money in ways you don't plan for.
Then subtract what's already there
Existing cover through a work scheme. Any existing personal policy. KiwiSaver balances. Other assets that could be liquidated without hurting the family further.
What's left is the real gap. Sometimes it's much less than the round number would have been. Sometimes it's much more. That's the point of sizing it properly.
This is general information, not personalised advice. Your situation is its own thing — the right answer for you depends on the details. Have a chat with one of our advisers and we'll walk you through it.