Life insurance calculator - How much do I need?

Life insurance provides a reassuring financial safety net for your loved ones if you’re no longer around to provide for them.

However, calculating exactly how much life insurance you need isn’t always straightforward.

Everyone’s circumstances are unique and therefore it takes careful consideration.

This article covers the commonly asked questions that can help you determine how much cover you require, such as:

Get started by using our life insurance calculator (below). This will help you to understand the aspects of your life you may want to protect and how much life insurance you may require.

Keep reading this article to find out ‘how much life insurance do I need’…

Life insurance calculator

Enter your financial commitments to establish the level of cover you require.

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£121,687 is the estimated average outstanding mortgage per household in the UK.

Our property is generally the largest financial commitment any of us will make.

Your life insurance should cover this significant debt should you no longer be around.
£
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According to Money Advice Service, full-time childcare in the UK now costs £242 a week.

The loss of a parent could result in the need for additional childcare whilst the surviving parent increases their hours to account for lost income.

Your life insurance cover should factor in this additional required outgoing.
£
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The average level of debt (minus a mortgage) in the UK is £15,385.

Factoring in any outstanding debts in your name when arranging life insurance ensures this burden is not passed to loved ones.
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You may wish to leave your loved ones an inheritance or lump sum gift upon your passing.

Factoring in the gift amount when arranging your cover will ensure the pay out amount will be sufficient to provide your loved ones with this selfless gesture.
£
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According to SunLife, the average cost of a UK funeral is now £4,417, whilst the total cost of dying is £9,493.

This is a 130% increase over the past 16 years and shows no signs of slowing down.

A significant cost which should be factored into the amount of life insurance you secure.
£
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If you are one of the 65% of the UK who are lucky enough to have savings, this could be used as protection if you were to pass away.

Any pay outs from existing life insurance policies and investments can also be used as financial protection for your loved ones if you were no longer around.

Factor this into your required cover amount.
£ -

Your total cover estimate

£ 0

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Do I need life insurance?

Most people are likely to benefit from having some form of financial protection in place.

You can ask yourself some key questions to help determine whether you’ll benefit from life insurance or not:

Does anyone depend on me financially?

If you have dependants that will be affected financially by your passing, life insurance can provide essential financial support.

A pay out from a life insurance policy can provide financial help to ensure your loved ones can continue with their current lifestyle if you were to pass away, avoiding additional stress at an already distressing time.

Do I have any other forms of cover in place?

Some people benefit from death in service, which is provided by an employer. This benefit will pay out a multiple of your salary if you pass away while in employment.

While this can help to ease the financial strain your loved ones may face if you were to pass away, it’s unlikely to cover everything for them.

It’s also important to note that if you leave your job, this benefit won’t follow you. For this reason, those with death in service benefit may choose to take out their own personal life insurance, to provide a more comprehensive solution.

Do I have savings?

Some people choose to put money away into a savings account for their loved ones in case the worst were to happen. 

However, it can take some time to save the amount of funds your loved ones would need to cover key expenses. Particularly for young couples with families, life insurance can help to provide protection without the need to put large sums of money away (allowing you to use these funds for other family costs).

Talking to a life insurance expert, like a member of our team here at Reassured, allows you to obtain all the information you need to decide if life insurance is right for you.

Our quotes are without obligation so why not get in touch?

If you think you would benefit from having life insurance in place to protect your dependants, keep reading to find out what life insurance can be used to cover and how much it could cost…

What do you need your life insurance to cover?

Life insurance can be used to help your loved ones to take care of key financial commitments should you pass away whilst cover’s in place.

How much cover you should take out can often be calculated by working out the sum of all of the financial commitments you currently have as well as other costs your family would need to cover after you’re gone.

Commonly a life insurance pay out is used to cover:

Mortgage payments

Are you a homeowner? According to research from themoneycharity.org.uk the average UK mortgage debt is £121,687.

To ensure your family home is secure, you’ll want to make sure your life insurance cover amount is at least enough to cover your remaining mortgage balance.

This means that if the worst were to happen, your mortgage could be cleared and your loved ones can remain in the family home - without having to worry about finding the funds to keep up with payments.

If you rent a property, the funds can be used to cover monthly rental payments.

Household expenses

Protecting your mortgage is likely to be of utmost importance. However, could your family afford to run the home and cover ongoing bills without financial support?

You may need your life insurance to cover the following expenses too:

  • Gas
  • Electricity
  • Water
  • Council tax
  • Property maintenance/repairs
  • Internet/phone/broadband

Future family living costs

If you’re a mum or dad you’ll want the peace of mind that your family will be able to continue their current lifestyle even if you were no longer around.

Your life insurance pay out could help cover the following ongoing family living expenses:

  • Food/drink
  • Clothing
  • Holidays
  • Car/fuel
  • Education fees
  • Leisure activities

In order to meet these on-going living expenses, you may consider family income benefit (FIB).

FIB provides monthly income payments to your loved ones rather than a lump sum pay out, which can help with long term family budgeting.

A family income benefit policy can be taken out alongside a standard life insurance policy. For example, a decreasing term life insurance policy to cover your mortgage and a FIB policy to protect living costs.

Education expenses

If you have children, then education costs may need to be factored in to the level of cover you need.

Your child will go to school for a minimum of 11 years, then potentially two years of college and three or four years at university.

While the core education system in the UK is often free, you may be required to cover:

  • Private school fees
  • University/tuition fees
  • School trips
  • Uniform/sports kit
  • Books equipment
  • Travel to and from place of learning

Outstanding debts

If you have any outstanding debts these could be recovered from the value of your estate if you were to pass away, meaning there could be less funds for your loved ones.

Common debts that could be taken care of by a life insurance pay out include:

  • Car finance
  • Credit card bills
  • Overdraft
  • Personal loans

A life insurance pay out can help to replace any funds which are taken from your estate to cover these, so your loved ones are left more financially secure.

Replace an income

If your family rely on your income to keep on top of key financial commitments, they may struggle financially after you’re gone.

Especially if your partner is a stay-at-home parent, childcare may need to be taken on to allow them to return to work - adding another expense to the mix.

It’s possible to work out how much life insurance you need by multiplying your salary by the number of working years you have left (until you reach retirement).

This way your loved ones can budget their pay out and continue living their current lifestyle.

Did you know you can also protect your income during your working life? Why not check out our income protection page to find out more?

Inheritance

You may want to leave an inheritance for your children and/or grandchildren after you’re gone.

This can be provisioned into your life insurance pay out and your policy may be able to be written in trust to avoid 40% inheritance tax.

Inheritance laws state that if your estate is valued at over £325,000, then any amount over this threshold is taxable by 40%.

Many UK estates easily exceed this threshold as estates include any property, money, possessions and life insurance policies you have.

Writing your life insurance in trust detaches the value of your life insurance from your estate so your loved ones get a full pay out.

Funeral costs

Funeral costs have risen by 128% in the last 16 years, with the average price for a funeral at £4,184. If we factor in all the associated costs this rises to a staggering £9,263[1].

It would be hard for many to find funds to cover this large expense at short notice, so the funds for your funeral can be factored into your life insurance policy to ensure this is covered when the time comes.

If your aged between 50 - 85 it’s commonplace to take out an over 50s plan or a funeral plan to cover these costs.

For a free quotation to cover the cost of your funeral, simply get in touch today.

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How much life insurance can I take out?

It's possible to secure a cover amount (or sum assured) of up to £1,000,000 with some life insurance providers.

However, insurers will consider each applicant on a case-by-case basis and may only let you secure a sum that will cover all of your financial obligations.

Personal factors which will strongly influence the level of cover you can secure include:

  • Your age
  • Your lifestyle
  • Your budget
  • Your medical history

Other personal factors you may want to consider include:

  • Whether you’re a parent or have dependants
  • Number of children that depend on you
  • Age of children (how long until that are financially independent)
  • The size of your mortgage
  • Whether you have personal savings

To really work out how much life insurance you need, you can look at these key factors one by one.

Alternatively, you could speak to an expert (like Reassured) who can talk through your personally circumstances and provide you with the most suitable options.

How long should I be covered for?

Once you have an idea of what you want to cover, you should be able to work out how long you need to be covered for. For example:

Until children reach financial independence

Typically this would be at 18 years of age, but if your child is likely to go into higher education you may want to provide enough cover until they reach the age of 21 to help fund any tuition fees or living expenses.

If you have more than one child, it’s likely you’ll want to have your policy term come to an end when your youngest child has reached financial independence.

Until the mortgage is paid off

Typically a standard mortgage length is 25 years, although it can be possible for a mortgage to be shorter or longer depending on the type you have. With this in mind, the length of your life insurance policy should mirror the length of your mortgage.

If you’re unsure of your mortgage term you can check your documents prior to securing cover.

To provide an inheritance

If you’re taking out life insurance to provide an inheritance for your loved ones it’s likely you’ll want to secure lifelong cover to guarantee a pay out upon your passing.

What type of life insurance should I take out?

There are different types of life insurance available, each suited to protecting different aspects of your life.

There’s a difference between life insurance, which pays out if you die (term-based cover) and life assurance which pays out when you die (whole of life insurance).

Term-based life insurance options only pay out if you pass away during the term. These include:

  • Level term
  • Decreasing term

Life assurance policies offer lifelong cover and pay out when you pass away.

As cover is provided for a longer period of time (the rest of your life) premiums tend to be higher. Your options include:

  • Whole of life
  • Over 50s plan

How much term life insurance do I need?

Term life insurance is life cover that:

  • Provides cover for a specified period of time (up to 40 years)
  • Has a potential pay out sum of up to £1,000,000
  • Comes with level or decreasing terms
  • Can be secured from just 20p-a-day

Term life insurance provides cover for a specified period of time and if you pass away during the policy term, a pay out is made to your loved ones.

You have two main options when it comes to term-based life insurance.

Level term life insurance provides a fixed sum assured, making it well suited to covering large expenses such as an interest only mortgage, as well as other large debts and covering family living costs.

Decreasing term life insurance has a sum assured that reduces over time, making it ideal for covering a repayment mortgage as your pay out amount can decrease at the same rate as your mortgage payments.

How much term life insurance you need will depend on what you want to cover and your available budget.

For example, if you want to cover both your mortgage and family living costs the amount of cover you require can be worked out as follows:

Remaining mortgage balance + cost of raising your child until the age of 18 = required sum assured

Alternatively, speaking to an expert such as Reassured can help you to determine the right level of cover to protect your loved ones.

How much whole of life insurance do I need?

Whole of life insurance is life cover that:

  • Lasts for the rest of your life
  • Guarantees your loved ones a pay out
  • Has a potential sum assured of up to £1,000,000
  • Possible to pay in more than it will pay out

Whole of life insurance provides lifelong cover and guarantees your loved ones a pay out when you pass away.

For this reason it’s an ideal option for providing an inheritance for your loved ones to enjoy as they wish.

Due to the large pay out potential the funds can also be used to cover mortgage payments, cover large debts as well as cover future family living costs.

However, due to the length of the policy, it can be possible to pay more into the policy than it will pay out if taking out cover at a young age.

Whole of life cover is well suited to those later on in life who’re still in good health as you can secure a greater pay out amount than with an over 50s plan.

Similarly to term life insurance, you can work out how much whole of life insurance you need with a simple sum adding up which financial commitments you’d like to take care of for your loved ones. This could be:

Inheritance + family living costs = required sum assured

Why not compare multiple whole of life policies to find the best policy for the right price?

How much life insurance do I need over 50?

Over 50s life insurance is cover that:

  • Guarantees acceptance to UK residents aged 50 - 85
  • No health or medical questions
  • Covers you for the rest of your life
  • Has a potential sum assured of up to £25,000
  • Guarantees your loved ones a pay out

As we get older, our financial commitments reduce and you may not need as much cover as you once did.

At this stage of life, it’s likely that your mortgage has been paid off and your children may have reached financial independence.

Due to this, a pay out from an over 50s plan is typically used to cover funeral expenses and to provide an inheritance for loved ones.

It’s estimated that in the UK the total cost of dying is now at £9,263 so it’s likely that when taking out an over 50s plan, you may want your sum assured to at least cover this amount[1].

It’s possible to secure a sum assured of up to £25,000 with some providers which would cover funeral costs as well as leave additional funds for your loved ones to spend how they wish.

Why not compare over 50s plans using our award-winning broker service to find a policy that meets all of your needs?

How much critical illness cover do I need?

Critical illness cover is an additional form of cover that:

  • Pays out if you’re diagnosed with a serious illness
  • Covers a wide range of illnesses
  • Available up until age 70
  • Can be added onto a life insurance policy

As with life insurance, the amount of critical illness you require will depend on your unique needs and circumstances.

Critical illness cover provides an additional layer of protection by allowing you to make an early claim on your life insurance policy if you were to be diagnosed with a serious illness (that’s listed within your policy).

The pay out can then be used to cover medical bills, make adaptions to your home or pay for carers.

It can be added to your life insurance policy for an additional fee or purchased as a standalone policy through some providers.

Compare life insurance with critical illness cover policies through Reassured to secure the best deal.

How much life insurance do I need for a mortgage?

You’re not required by law to secure life insurance when taking out a mortgage. However, as a mortgage is likely the largest debt we’ll have in our lifetime, it makes sense to protect it.

How much life insurance you need to cover your mortgage will depend on:

  • What type of mortgage you have
  • Your remaining mortgage balance

When protecting your mortgage with life insurance, you’ll at least need to have your sum assured match your mortgage balance to ensure there are enough funds to cover it in full.

If you have an interest only mortgage, a level term life insurance policy will be well suited to covering this due to the fixed pay out amount.

If you have a repayment mortgage a decreasing term life insurance policy will be ideal as you can have your sum assured reduce in line with your remaining mortgage balance.

Speak to a friendly member of our team about protecting your mortgage to find the best life insurance solution to meet your needs.

How much life insurance do I need for my child?

Research from the Child Poverty Action Group found that in 2020 the basic cost of raising a child to the age of 18 was £71,611.

With this in mind, you may choose to have your sum assured mirror this amount to ensure there are enough funds to raise your child should the worst happen to you.

Although, this is only the basic amount so it may be beneficial to factor in other costs such as higher education, driving lessons etc.

If you’re a stay at home parent, it can also be beneficial to factor in all the unpaid work that goes into raising a child.

For example, if you were to pass away, could your partner afford to pay for additional childcare fees or would they need to reduce their hours at work in order to look after the children?

By considering this when taking out life insurance, you can ensure there are enough funds to cover additional childcare.

Why not read our comprehensive how much does it cost to raise a child UK guide?

How much is life insurance?

Once you’ve determined the level and type of life insurance you require, the next question is likely to be how much will life insurance cost?

Life insurance is paid for via monthly premium payments and the cost of these is determined using key information.

10 key factors which affect the cost of your premiums:

  1. Your age - The younger you are when you take out a policy, the cheaper your premiums
  2. Amount of cover - The greater the cover amount, the higher your premiums
  3. Length of term - The longer the policy then the higher your premiums
  4. Type of life insurance - For example, decreasing term cover is cheaper than whole of life cover
  5. Health - If you have or have had any medical issues, such as diabetes or cancer, this will increase your premiums
  6. Weight / BMI - If you’re overweight your premiums will increase
  7. Smoking status - If you smoke this will increase the cost of premiums
  8. Alcohol consumption - If you regularly consume high levels of alcohol this will increase premiums
  9. Lifestyle - If you regularly take part in extreme sports, do a dangerous job or regularly travel to dangerous countries then this will impact your premiums
  10. Family medical history - Even if you’re in good health, if there’s a family history of illness this can increase premiums

(Please note: when insurers work out the cost of your life insurance premiums they look at many different factors. The list above are just some of the key considerations)

As the cost of your life insurance premium is calculated using your individual circumstances, the price paid will vary from person to person.

You can find the most cost-effective premium by comparing multiple policies, or you could let Reassured do the hard work for you.

The table below shows the most common life insurance policy types and some example premium prices.

Quotes are based on a non-smoker. Both level and decreasing term life insurance are based on a 20-year term for £100,000 of cover. Whole of life insurance is based on £100,000 of cover and the over 50s plan is based on £25,000 of cover.

AgeLevel termDecreasing termWhole of lifeOver 50 plan
20£4.10£4.55£61.39

N/A

25£4.99£4.93£65.43N/A

30

£5.36£4.99£72.10N/A
35£6.20£5.17£84.56N/A
40£8.19£6.23£103.03N/A
45£11.91£8.49£126.75N/A
50£18.12£11.43£152.97£25
55£27.88£18.12£179.64£31
60£48.81£30.97£210.54£75
65£92.32£50.41£266.15£75
70N/AN/A£349.96£75


Simply get in touch for your FREE, personalised life insurance quotes.

Can I have two life insurance policies?

Yes, if your budget allows, it’s completely possible to have more than one life insurance policy.

As each life insurance policy type is well suited to covering different aspects of your life, layering these policies can help to provide an all-encompassing life insurance solution.

For example, you could secure a decreasing term life insurance policy to protect your repayment mortgage alongside a level term life insurance to provide an inheritance for your loved ones.

This could also be layered with critical illness cover to provide an extra safety net of protection.

Should I take out joint life insurance or two single policies?

If you have a partner you may consider taking out a joint life insurance policy to cover both lives simultaneously.

The main advantage of doing this is that it’s usually around 30% cheaper compared to the combined premiums of two single policies.

It’s important to remember that whilst a joint policy is significantly cheaper, it’ll only pay out once (usually after the first death).

After this the surviving partner will be left without cover or will need to secure a new policy at an older age (with potentially higher premiums).

In contrast, two single policies will offer two separate pay outs, providing double the coverage.

What’s best for you will ultimately depend on what you want to cover and your available budget.

The table below shows the price comparison between a joint life insurance policy and the combined price of two single policies. These quotes are based on non-smokers for a level term policy, over a 20-year term for £100,000 of cover.

AgeJoint policyTwo single policies% Saving
20£6.26£8.20-31%
25£7.24£9.98-38%
30£8.22£10.72-30%
35£9.15£12.40-36%
40£11.43£16.38-43%
45£14.98£23.82-59%
50£21.64£36.24-67%


Why not save time and money by letting Reassured conduct a full joint vs two single policies comparison on your behalf?

Compare life insurance quotes (to secure the best deal)

As you can see, how much life insurance you need is very subjective and based on your personal circumstances.

Therefore, to ensure you secure the right level of cover for the best price, it’s best to speak to an expert like Reassured.

A friendly member of the team can talk through your needs and provide you with the most suitable options by comparing quotes from some of the UK’s leading insurers.

We’ll also be on hand to answer any questions you might have and decode any jargon you don’t understand.

Our award-winning and FCA-regulated service is fee-free so why not compare quotes and find your perfect policy?

Compare Life Insurance Quotes »

Sources:

[1] SunLife (2021), Cost of Dying Report, sunlife.co.uk/costofdying2021

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