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How much Life Insurance cover do you need?

Life insurance is an essential policy to provide financial protection to your loved ones if you die, helping them to feel financially secure at a difficult time.

However, a common question from those looking to take out a life insurance policy, is how much do I actually need in terms of cover?

There is no watertight answer here; the amount of cover required is always going to depend on an individual's particular circumstances.

Here are some suggestions below on how to approach this and find out what level would be best for you before you compare life insurance quotes*:

Your commitments

Firstly you should think about your commitments and the impact your death might have on your dependents such as your partner and any children in terms of helping them to maintain a similar lifestyle.

Generally the reason to take out life insurance falls into four distinct reasons: to pay off debts, help with funeral costs, provide ongoing income for dependents, or to meet an inheritance tax liability on an estate.

Most people decide they only need life insurance to cover them for a set period of time e.g. to settle a mortgage repayment over a 25 year period or until the children finish full-time education.

A basic rule of thumb to work out life insurance requirements is often ten times annual income.

However, to get a a good understanding of how much you might need, it’s a good idea to set out your family’s household income and outgoings &emdash; think about your pay, your bills and other commitments you have on a monthly basis.

Key questions to think about are, how much do you have in savings and how much do you owe on your mortgage, credit cards and other debts? Does your family rent? How would your loved ones meet these obligations if you were no longer around?

In addition, how many years would you expect your partner and any dependents to be financially dependent on you?

Here you might want to think about the day-to-day living expenses that they might require as well as bigger obligations such as childcare costs, school and university fees, or even additional money you may like to set aside.

The other urgent question is: how would my loved ones pay for my funeral? A typical UK funeral now costs on average £3,675, according to the latest figures published by the Money Advice Service. This cost varies by region and by type of funeral arrangements.

And finally, will you have any IHT liabilities on your estate and will any life insurance pay-out be part of that liability?


Although life insurance premiums can start from as little as £5 a month, going for the cheapest deal is not necessarily the best idea.

After all, you do not want to your family to be underinsured. You need to make sure that the policy that you take out reflective of your family’s circumstances but you should also work out a manageable level that you can afford to pay each month in in premiums.

Factors that affect the price of your policy will include your age, health, lifestyle habits such as smoking and the length of the policy.

Life policies can cover single or joint lives - it is worth comparing the cost of taking out two single life policies for yourself and your partner as well as comparing how much a joint life policy might be for you both combined.

When taking out life cover, perhaps one of the biggest challenges is deciding whether to take out increasing cover or decreasing cover. This again affects the monthly premiums you will pay.

Another feature to cost in would be the addition of critical illness cover, which pays out a tax-free lump sum in the event that you have been diagnosed with what your policy defines as a critical illness, the most common place are heart attack, cancer or stroke.

Review your policies

You should regularly review the amount of life cover you have to make sure it is fit for purpose for your current circumstances.

If you have another child or move to a larger property for example, you should ensure that your life policy meets your family’s changing needs.

Once you are happy with your decisions on the above factors, you can compare quotes by clicking here

*This is not financial advice &emdash; for further details you should talk to an FCA registered financial adviser.

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QuoteLifeCover.com is a trading name of British Life Ltd, a company registered in England no. 05559125.

Registered Office Address: 20-22 Wenlock Road, London N1 7GU

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QuoteLifeCover.com is an independent website created to help customers find the best possible life cover quote for their circumstances. We do not provide any financial advice. Instead, we work with FCA authorised advisers who search and compare life insurance policies from leading life insurers for the best deals available. Our service is 100% free to use and you are under no obligation to accept any of the quotes you receive.