Suppose your family spends R30,000 a month.

If R5,000 of those expenses would fall away after your death, your family would still need:

R30,000 − R5,000 = R25,000 a month

R25,000 × 12 = R300,000 a year

If invested capital earned 10% annually, the capital required to produce that income would be:

R300,000 ÷ 10% = R3 million

That is a useful starting illustration. It is not a complete life-cover calculation, and 10% is an assumed return—not a guaranteed income.

Let’s look at what else matters.

Start With What Your Family Would Still Spend

List the household’s actual expenses: housing, groceries, electricity, transport, medical cover, schooling and other regular commitments.

Then subtract only the expenses that would genuinely stop when the person dies.

Many household costs remain. The bond instalment does not disappear because one person is gone. School fees, groceries and electricity still need to be paid.

Some costs may even increase. A surviving parent might need help with childcare or transport that the deceased previously provided.

If the household would still receive income, such as the surviving partner’s earnings, deduct the amount realistically available towards these expenses. The remaining shortfall is the income that needs replacing.

Why the Investment Return Matters

In our example, the family needs R300,000 a year.

The capital required changes with the return assumed:

Assumed annual return	Capital to produce R300,000 a year
10%	R3 million
8%	R3.75 million
6%	R5 million

These are simple illustrations before tax and fees. They assume a steady return and do not allow for future increases in expenses.

Investment returns can fluctuate. Spending all the investment earnings can also leave little room for the capital to grow with inflation.

A financial plan therefore needs to consider how long the income must last, investment risk, tax, fees and the family’s changing needs.

Allow for Debts and Once-Off Costs

Income replacement is only part of the calculation.

There may also be a bond to settle, other debts, estate expenses and future education costs.

Avoid counting the same expense twice. If the plan provides a separate lump sum to settle the bond, remove the bond instalment from the ongoing monthly budget used to calculate income replacement.

Then consider existing life cover, confirmed employer death benefits and assets available to support the family. Check who receives those benefits, when they become available and whether any conditions apply.

A Family I Have Never Forgotten

During my years as a financial adviser, I met a young couple to help them with their wills.

The husband was about 38 and his wife about 34. Their boys were five and three.

While discussing their wills, I asked whether they had life insurance. They had none.

The husband asked me to diarise another appointment after his annual salary increase, which was due in two months. We would discuss life cover then.

Before that appointment, he was killed in a hit-and-run accident while cycling early one morning near Stellenbosch.

There were no death benefits through his employer and no life-policy payouts.

His widow struggled for years to meet the household’s monthly expenses and raise their boys. Later, she remarried, and another income brought more financial support into the household.

I have never forgotten that family.

They intended to address the need. But the family’s financial dependence existed during those two months as well.

A will records your wishes. It does not, by itself, create the money your family may need.

Why Annual Cover Increases Matter

The amount that supports a family today may buy less in future.

When taking out life cover, ask about automatic annual increases in the insured amount, including inflation-linked options where available. Understand how the premiums will increase and whether they will remain affordable.

A higher premium does not necessarily mean a higher payout. Check both.

Also ask which agreed increases can continue without fresh medical assessment, and what limits or conditions apply. A later health condition could make additional cover more expensive or difficult to obtain.

Your Need for Cover Can Also Reduce

Increasing cover does not mean increasing it indefinitely without reviewing the need.

Over time:

• Your bond may be settled.
• Your children may finish studying and become financially independent.
• Your investments may grow.
• Your household may depend less on your earnings.

As assets become sufficient to meet the family’s needs, less life cover may be required.

However, use realistic investment values and consider whether those assets are accessible, committed to retirement or needed for other purposes.

Before reducing cover, recalculate the household’s needs and remember that replacing the cover later could require a new health assessment.

Review the Whole Picture

Review your cover regularly and after major changes such as marriage, a new child, a new home, a job change or a child becoming financially independent.

The aim is to keep enough protection for the financial gap your family would face.

Start with their monthly expenses. Then work through the assumptions, debts, assets and benefits that affect the result.

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This article provides general financial education, not personalised financial advice. Calculations are illustrative. Cover, annual increases and underwriting requirements depend on the policy terms.