How much life insurance do I need?

There is no single correct figure for life insurance cover, but a useful starting point in the UK is to add up your mortgage, other debts, the cost of raising any dependants, and a few years of replacement income, then subtract savings and any cover you already have. The result is a realistic target sum assured.

This guide explains a practical way to work it out, what the different parts cover, and how to avoid being either dangerously underinsured or paying for cover you do not need.

Start with the gap, not a round number

Life insurance is there to fill the financial gap that would appear if you died. The right number is the amount that would let the people you support carry on without sudden financial pressure.

That gap usually has four parts:

• Debts that need clearing, especially the mortgage.
• Day-to-day living costs your income would have covered.
• Future costs that your family will face, such as childcare or education.
• A buffer for the unexpected.

You then take away anything that would already be available, such as savings, death-in-service from an employer, existing personal cover, and any pension lump sum.

Step 1: clear the mortgage

For most homeowners, the mortgage is the biggest single liability. If you have a mortgage, the cover should be enough to clear the outstanding balance.

A repayment mortgage suits decreasing term cover, because the cover reduces broadly in line with the loan. An interest-only mortgage suits level term cover, because the balance does not fall over time.

If you have a joint mortgage with a partner, think about whether you each need cover so that either of you could stay in the home alone.

Step 2: clear other debts

Add any other significant debts you would not want to leave behind. This typically includes:

• Personal loans.
• Credit cards.
• Car finance.
• Bounce-back or business loans you have personally guaranteed.

You may not need to cover small revolving balances that you usually pay off every month.

Step 3: replace income for the people who depend on it

If others rely on your income, this is the part most people underestimate.

A common rule of thumb is around ten times your annual income as a starting point. MoneyHelper notes that the right amount depends on your circumstances and the people who depend on you, so a rule of thumb is only a guide.

To be more precise, work out:

• Your net annual income.
• How many years your family would need that income replaced.
• Whether the figure should reduce as children grow up.

For example, a parent earning GBP 35,000 a year with two young children might want fifteen years of income replaced. That would be GBP 525,000 of cover for the income element alone, before the mortgage and other costs.

You can choose level term cover for a flat figure, or a family income benefit policy that pays a regular monthly amount instead of a lump sum.

Step 4: add future family costs

Some costs will land whether or not you are around. Common items include:

• Childcare, especially if a surviving partner needs to work.
• School costs, uniforms, trips, and equipment.
• University support, if relevant to your family.
• Care or support for older relatives you help.

These are easy to forget, but they can be substantial. Even a modest annual figure across many years adds up quickly.

Step 5: take off what is already there

Before deciding on a sum assured, deduct:

• Cash savings and easy-access investments earmarked for emergencies.
• Death-in-service cover from your employer, often expressed as a multiple of salary.
• Existing personal life cover.
• Any pension death benefits payable as a lump sum.

This stops you paying for cover you already have. Just check the small print, because employer benefits may end if you change job and pension benefits depend on scheme rules.

Worked example

A homeowner with a partner and two children has:

• A repayment mortgage of GBP 220,000.
• Other debts of GBP 10,000.
• Annual net income of GBP 32,000, supporting the family for fifteen years.
• Future childcare and education costs of around GBP 60,000.
• Savings of GBP 15,000 and employer death-in-service of four times salary, around GBP 128,000.

The basic calculation is GBP 220,000 plus GBP 10,000 plus GBP 480,000 plus GBP 60,000, which equals GBP 770,000. After deducting GBP 15,000 plus GBP 128,000 of existing cover, the figure becomes around GBP 627,000.

That number is not magic. It just turns rough thinking into something you can buy a policy against.

Should you split the cover?

It often makes sense to layer policies. For example:

• A decreasing term policy to track the mortgage.
• A separate level term life insurance policy for family protection and other debts.
• A family income benefit policy if you want a regular monthly payout for your partner.

Splitting cover makes it easier to match each need with the right product and avoid paying for a single very large policy that does more than you need.

Watch out: the things that can change the figure

A few common factors push the right cover up or down.

• Inheritance Tax. The estate may face an Inheritance Tax bill above the relevant thresholds, depending on the size of the estate and whether allowances apply. GOV.UK explains the basic Inheritance Tax position.
• Inflation. A flat sum assured will buy less over time. Some policies offer index-linking.
• Health and underwriting. Cover costs more as you age and if your health changes, so locking in cover earlier can be cheaper over the long run.
• Joint vs single life policies. A joint life first death policy pays once, on the first claim. Two single life policies provide cover that can pay twice if both partners die during the term.

How likely is a payout?

Protection insurance is designed to pay when a valid claim meets the policy terms. The Association of British Insurers reported that UK protection insurers paid a record GBP 8 billion in combined group and individual protection claims during 2024, and that the proportion of new individual claims paid remained high at 97.9%.

The cover is only useful if the sum assured matches the real need.

Bottom line

A sensible UK starting point is mortgage plus other debts, plus enough income replacement to keep the household running, plus future family costs, minus existing savings and cover. Use a rule of thumb only as a sanity check, then refine the number using your own circumstances.

If you are not sure how much you need, GoInsureMe can help you talk it through and look at suitable cover.