Life insurance: calculate the household gap before choosing a sum
The right death benefit starts with the financial consequences for the people left behind. A multiple of salary is a quick headline, but it misses housing costs, childcare, debts and the survivor’s capacity to keep working.
The question that matters
The right death benefit starts with the financial consequences for the people left behind. A multiple of salary is a quick headline, but it misses housing costs, childcare, debts and the survivor’s capacity to keep working.
A stronger analysis separates the first year from the longer adjustment period. The surviving household may need time to reorganise work and housing before expenses settle. Treat these transition costs as a separate capital requirement, because averaging them across ten years can understate the immediate cash need.
Build the evidence
Create a monthly budget for the surviving household, then a separate list of one-off costs. Obtain actual survivor-benefit estimates from the pension institution and compensation office. Count accessible savings separately from retirement assets that cannot simply be spent.
Do not subtract every asset mechanically. A home provides shelter but is not a cash account; selling it can generate transaction costs and a different housing bill. Mark each asset as immediately accessible, accessible with consequences, or unavailable under the scenario. This keeps the calculation realistic without claiming a precise future value.
A hypothetical case
Imagine expenses of CHF 6,000 a month and confirmed recurring resources of CHF 4,500. The illustrative gap is CHF 1,500, or CHF 18,000 annually. Financing ten years means CHF 180,000 before inflation, tax, investment effects or one-off commitments; it is not an insurance recommendation.
For a sensitivity check, extend the funding period from ten to fifteen years while leaving the annual gap unchanged. That increases the simple capital requirement by CHF 90,000. Then test whether a realistic increase in the survivor’s earnings shortens the period. These alternatives reveal which assumptions drive the proposed sum.
Compare the right conditions
Compare level and decreasing capital, the insured period, premium commitments and beneficiary arrangements. A decreasing mortgage does not necessarily mean decreasing family needs: children’s education and replacement childcare can peak later. Ask for a year-by-year view of obligations.
Request comparable quotations using the same capital, duration, applicant information and effective date. A cheaper contract with a shorter term does not address the same need. Make the comparison include what happens if the insured person wants to reduce or cancel protection when obligations change.
Limits and uncertainties
AVS and LPP survivor benefits have eligibility conditions; the household should not assume that every partner receives them. The simple calculation also ignores the timing of payments and future earning changes. Keep statutory eligibility distinct from the private policy’s beneficiary provisions.
The household should also identify who can access emergency savings immediately. A future insurance benefit may require documents and assessment. A modest separate liquidity reserve can address near-term practical bills, while the longer-term death capital serves a different purpose. Avoid counting the same reserve twice in the gap calculation.
Your practical next step
Bring the pension certificate, household budget, mortgage schedule and existing policies to an adviser. Ask for a written gap calculation with conservative assumptions and two coverage durations. Update it after a birth, separation, move or material income change.
Keep a dated assumptions sheet alongside the selected policy. Record which benefit estimates were confirmed and which remain provisional. This gives the next review a clear starting point and prevents an outdated calculation from appearing more certain than it is after years of salary, expense or family changes.
Sources and further reading
Original Clearwise analysis. External reporting provides context; rules and contract terms must be verified with the competent authority or provider. Some press articles may require a subscription.
Apply this to your situation
Compare your actual documents and clarify what matters before making a commitment.
Request a free consultationGeneral guidance, not a binding quote or personalised legal, tax or investment advice. Examples are hypothetical and results are not guaranteed.
