How much life insurance do I need UK?

How much life insurance you need will depend on your personal circumstances, such as whether you have dependents, a mortgage and/or any savings.

One common rule of thumb is that your life insurance cover amount (sum assured) should be 10 times the salary of the highest earner in the household.

This is so your loved ones can maintain their current standard of living, without having to make cutbacks at an already challenging time.

Life insurance can provide a reassuring financial safety net for your loved ones if the worst were to happen to you.

In this guide we’ll cover commonly asked questions which could help you determine how much life insurance you require, such as:

Keep reading to find out how much life insurance you might need, plus other frequently asked questions and top tips.

Reassured can help you compare life insurance quotes from some of the UK’s best life insurance providers.

We’re experienced, award-winning and don’t charge a fee for our quotes. Best of all, life insurance through us starts from just 20p-a-day.

Get in touch today for your free and no-obligation quotes.

Source: https://cpag.org.uk/sites/default/files/files/policypost/Cost_of_a_child_2022.pdf

How do I calculate how much life insurance I need?

Calculating how much life insurance you need can be as simple as adding up the sum of what you’d like to protect, for example:

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

Fortunately, there are now many handy tools out there which can help you add together your key costs, like our life insurance calculator below:

How much life insurance do I need calculator

Work out how much life insurance you may need based on your current and future financial commitments. Simply fill in the fields which apply to you for an instant calculation.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk

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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk

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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk

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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk

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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org

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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk

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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net

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Do I need life insurance?

Most people are likely to benefit from having some form of financial protection in place, particularly if you have anyone who will be financially affected by your passing.

There are some key questions you can ask yourself to establish whether life cover is the right option for you:

1. Do you have anyone who depends on you?

Whether you have children, a partner or an older relative who rely on your income, your passing will have a significant impact (not just emotionally, but financially).

A pay out from life insurance could allow them to continue with their current lifestyle when you’re no longer around.


2. Do you have any other forms of cover in place?

Maybe you have death in service benefit, which will pay out a lump sum (usually a multiple of your salary) to your loved ones if you pass away while in employment.

This is a generous benefit to receive from your employer and could help to reduce the amount of personal cover you need.

It’s unlikely that death in service alone could cover everything for your loved ones and, if you leave employment, you’ll no longer benefit.

A combination of death in service and personal cover can help to provide a comprehensive solution.


3. Do you have savings?

Some people choose to put money into a savings account for loved ones to use if the worst were to happen.

If you don’t have savings, life insurance can allow you to provide your loved ones with a lump sum pay out, if you pass away during the term, without the need to put away large sums of money.

Even if you have savings, it could take a significant period to save all the necessary funds and these funds would likely be subject to 40% inheritance tax after forming part of your estate.

While your life insurance pay out could be subject to inheritance tax, it’s possible to write your policy in trust to detach the funds from your estate (helping to avoid/minimise inheritance tax).

Speaking to an expert can allow you to establish whether life insurance is the right option for you.

At Reassured, we can talk through your needs and provide you with all the information you need to make a fully informed decision.

Our quotes are fee-free and without obligation so why not get in touch?

What do I need my life insurance to cover?

Life insurance should cover key financial commitments and other essential costs, including:

  • Mortgage - Average mortgage debt in the UK is estimated to be £146,427[1]. Life insurance could help to keep your loved ones in the family home by covering this large debt
  • Household bills - The average spent on bills each month is around £1,500 (including rent, mortgage, utilities, council tax and TV licence)[2]
  • Future family living costs - The cost of raising a child until the age of 18 is over £150,000 for a couple and over £200,000 for a lone parent[3]
  • Higher education costs - Parents could be expected to contribute over £5,000 per year to help their children with living costs while at university[4]
  • Outstanding debts - As of 2023, average unsecured debt in the UK is at £3,743[5]
  • Household income - The median household disposable income in the UK is £32,300[6]. Could your family get by on just one income if you were no longer around?
  • Funeral costs - The average cost of a funeral in the UK is now £3,953, with the overall cost of dying at £9,200[7]
  • An inheritance - You could choose to leave an additional sum as a cash gift to allow loved ones to lead a more financially comfortable life, allow them to make a big purchase (such as a house deposit, a new car or dream holiday) or you could leave this sum to a charity close to your heart

Depending on your personal circumstances, your life insurance could cover all of these obligations, or just some of them.

Ultimately it will be up to you and what you’d like to protect for your loved ones.

Get in touch with Reassured today to find the right life insurance cover to suit your personal circumstances.

How much term life insurance do I need?

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

You have the option to choose between:

Level term life insurance - Which provides a fixed pay out if you pass away during the term.

Decreasing term life insurance - Which provides a pay out that reduces over the policy lifetime.

Term life insurance is often used to help cover expenses such as a mortgage, other debts and/or family living costs.

Therefore, the amount of cover you need will likely depend on your remaining mortgage balance and how long your children have left until financial independence.

How much term life insurance do I need?

Term life insurance key points

  • Provides cover for a specified period (the term)
  • A pay out will be made if you pass away during the term
  • Pay out can be level or decreasing term
  • Term length up to 50 years
  • Sum assured up to £1,000,000
  • Medical information required during the application
  • Available from just 20p-a-day through Reassured

Source: https://www.finder.com/uk/mortgage-statistics

How much life insurance do I need for a mortgage?

How much mortgage life insurance you need will depend on your remaining mortgage balance and term.

Mortgage life insurance is actually a decreasing term life insurance policy which is taken out to help protect a mortgage.

Decreasing term life insurance is an ideal choice for helping protect a mortgage.

Your sum assured can reduce in line with your remaining mortgage balance and you can select a term which aligns with your mortgage term.

By doing this you could leave adequate funds for your loved ones to remain in the family home should anything happen to you.

How much mortgage life insurance do I need?

Mortgage life insurance key points

  • A decreasing term life insurance policy taken out specifically to help cover your mortgage
  • A pay out will be made if you pass away during the term
  • Term length up to 50 years
  • Sum assured up to £1,000,000
  • Medical information required during the application
  • Available from just 20p-a-day through Reassured ¥

How much whole of life insurance do I need?

As with other forms of cover, how much whole of life insurance you need will depend on what you’d like to protect.

Whole of life insurance lasts for the rest of your life, guaranteeing your loved ones a pay out when you pass away.

The pay out will remain fixed throughout the policy lifetime, helping you to cover large costs for your loved ones (such as any remaining mortgage debt and family living costs).

Due to the guaranteed nature of this policy type, you may wish to factor in an inheritance for your loved ones.

It’s also wise to factor in your funeral costs to help alleviate loved ones of this financial burden.

How much whole of life insurance do I need?

Whole of life insurance key points

  • Provides lifelong cover
  • Guarantees a pay out to loved ones when you pass away
  • Sum assured up to £1,000,000
  • Medical information required during the application
  • Well suited to those later in life who are still in good health
  • Available from just 27p-a-day through Reassured ±

How much life insurance do I need over 50?

Typically, as we get older, our financial commitments reduce as the mortgage gets paid off and children grow up.

Therefore, you may not need as much cover as you once did.

The most common form of cover for those over 50 is an over 50s plan, as acceptance is guaranteed to those aged 50 - 85.

With this policy type, cover is often capped at a lesser amount (up to £20,000 depending on your personal circumstances and budget) due to no medical information being required during the application process.

An over 50s plan is a popular choice to leave loved ones the funds to help pay for your funeral and/or leave them a small inheritance to spend as they wish.

How much over 50 life insurance do I need?

Over 50s plan key points

  • Provides lifelong cover
  • Pay out is guaranteed
  • Sum assured up to £20,000
  • Guaranteed acceptance with no need to provide medical information during the application
  • Available from 20p-a-day through Reassured +

How much life insurance do I need for my child?

Research from the Child Poverty Action Group found that the full cost of raising a child to the age of 18 is £157,562 for a couple and £208,735 for a single parent[3].

With this in mind, it could be wise to have your sum assured reflect this amount to ensure there are enough funds to raise your child should the worst happen to you.

You may also choose to include additional costs such as driving lessons, a first car and higher education costs into your cover amount.

Compare quotes through Reassured to help protect the financial future of your family. Quotes start from just 20p-a-day.

We have a comprehensive how much does it cost to raise a child UK guide if you require further information to establish how much cover you should secure »

Source: https://www.sunlife.co.uk/funeral-costs/

How much life insurance do I need in retirement?

It’s estimated that the minimum required to survive as a single pensioner is £12,800 per year[8].

With at least 17% of UK residents over 55 having no pension or savings to fall back on (other than the state pension)[9], you may wish to leave your partner a sum of money so they can retire comfortably.

As you reach retirement you may also start planning for later life and start provisioning for your funeral.

An over 50s plan is typically capped at £20,000 (due to no medical information being required during the application), therefore this could allow you to provide a lump sum payment to help your loved ones cover the cost of your funeral and/or provide them with a small inheritance.

If you’re still in good overall health, it could also be possible to secure whole of life insurance to provide a larger sum to help loved ones with living costs and/or paying off any outstanding debts.

If you’re reaching retirement, why not check out our over 60 life insurance page to find out more about your options »

Other frequently asked questions

How much life insurance can I take out?

Each insurer will have a maximum cover amount available. Through Reassured it’s possible to secure up to £1,000,000 of cover.

Although a maximum sum can sound tempting, it’s important to secure a cover amount which is right for your needs.

Taking out unnecessary cover means you’ll pay more for your monthly premium, which could become costly over the lifetime of your policy.

What type of life insurance should I take out?

When taking out life cover, you can secure term-based cover or cover that will last for the rest of your life (life assurance).

If you have specific aspects of your life that you’d like to cover, such as a mortgage or family living costs, term life insurance can allow you to help protect these for a specified period.

For example, if you would like to help protect future living costs for your loved ones you could opt for a term that aligns with when your children reach financial independence (up to the age of 18, or 21 if they are likely to attend university).

Alternatively, if you would like to guarantee your loved ones a pay out and ensure they receive funds to help cover funeral costs when you pass away, an over 50s plan or whole of life insurance policy could be more suitable.

How long should I be covered for?

Ultimately, how long you should be covered for will depend on what you want your life insurance to cover. For example, this could be:

  • When your children reach financial independence - If securing cover to help protect the financial future of your children, it’s wise to align your policy term with when they’re likely to be financially independent (for example, 18 or 21)
  • When your mortgage term comes to an end - A typical mortgage term is 25 years (however this can vary). If using life insurance to help protect your mortgage, the length of your life policy should mirror the length of your mortgage to ensure it’s fully protected should anything happen to you
  • When you pass away - If you want to help cover funeral costs and provide an inheritance for your loved ones, taking out life assurance can guarantee a pay out to help cover these costs when you pass away

We have written a comprehensive article answering all the key questions that help determine how long does life insurance last? »

Can I have two life insurance policies?

Yes, it’s possible to take out more than one life insurance policy.

Each policy type is well suited to protecting different aspect of your life, therefore you could opt to secure multiple policies.

For example, you could take out a decreasing term life insurance policy to help cover your mortgage alongside a level term life insurance policy to help protect family living costs.

How much critical illness cover do I need?

How much critical illness cover you require will depend on your personal circumstances.

Critical illness cover can be added to a life insurance policy for an additional fee to provide a lump sum payment if you’re diagnosed with a serious illness.

The funds received could help to cover lost income and/or pay for private medical fees/carers.

Therefore, when establishing how much cover you need, you’ll need to think about how much you and your loved ones are likely to need if you were unable to work.

We have a complete how much critical illness cover do I need guide if you require more information »

Find the right life insurance for your needs (compare quotes)

Speaking to a life insurance expert, such as Reassured, can help you establish how much life insurance you need.

We can take your personal circumstances and reasons for wanting cover into consideration to provide you with the most suitable options.

A friendly member of our team can help you compare quotes from some of the UK’s best insurers to find you our most affordable deal.

We’ll also be on hand to guide you through the application and answer any questions you might have along the way.

Our award-winning service is fee-free so why not get in touch to find your ideal policy?

Sources:

[1] https://www.finder.com/uk/mortgage-statistics

[2] https://skintdad.co.uk/average-household-bills-per-month-uk

[3] https://cpag.org.uk/sites/default/files/files/policypost/Cost_of_a_child_2022.pdf

[4] https://www.savethestudent.org/money/asking-parents-for-money-university.html

[5] https://moneynerd.co.uk/average-personal-debt/

[6] https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householddisposableincomeandinequality/financialyearending2022

[7] https://www.sunlife.co.uk/funeral-costs/

[8] https://www.theguardian.com/money/2023/apr/15/uk-pensions-how-much-retire-cost-of-living-inflation-income

[9] https://www.unbiased.co.uk/news/financial-adviser/one-in-six-over-55s-have-no-pension-savings-yet

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