How much life insurance do you need? There is no fixed sum that is right for everyone. A useful starting point is to consider what your family would still have to pay for if you died, how long they would need support and which resources would genuinely be available to them.
The aim is to choose cover that addresses a real financial shortfall without paying for benefits you do not need. This guide walks through the main steps. Any example is illustrative, not a personal recommendation.
1. List your mortgage and other financial commitments
Start with debts that someone else may need to repay or continue servicing, including a mortgage, joint borrowing and any loans. Whether a particular debt needs repaying in full depends on your circumstances and the person who would remain responsible for it.
For a repayment mortgage, it may be worth comparing mortgage life insurance and decreasing term cover. If you want the insured amount to stay fixed for other family needs, level term cover may be more suitable.
2. Work out what your dependants would spend
Estimate essential household spending your partner or family could struggle to meet without your contribution: food, bills, housing costs, childcare, transport and other everyday commitments. Think about how those costs might change over time, especially when children become more financially independent.
It may help to estimate the annual shortfall and multiply it by the number of years you want support to last, while allowing for future changes. This is only a planning exercise; it is not a formula that guarantees the correct cover amount.
3. Consider one-off family costs
Depending on your circumstances, you might want to allow for childcare, immediate household costs, a funeral and other commitments that would be difficult to meet from existing resources. Do not assume every expense has to be insured or use arbitrary cost estimates from an older article without checking them.
4. Account for money and insurance already available
Check existing life policies, death-in-service benefits, accessible savings and any other support your dependants would actually be able to use. Be careful about treating all assets as liquid: a family home or a pension is not necessarily cash available immediately or available to the same person.
Death-in-service cover from an employer can be useful, but eligibility may end when you leave the job. Check the scheme rules, who receives the benefit and whether it is enough to meet your family’s longer-term needs.
5. Choose how long the cover should last
Policy term is just as important as the amount insured. You might want protection until a mortgage is repaid, until children are no longer dependent or until a partner’s retirement. Think about the point at which the financial risk you are trying to address is likely to fall.
For example, someone with young children could need income support for a different period from somebody whose only concern is a mortgage ending in eight years. See how long life insurance should last for more detail.
A simple worked example
Imagine a household estimates:
- £180,000 to clear its remaining repayment mortgage.
- £90,000 of additional family support, equivalent to a planned £18,000 shortfall for five years.
- £40,000 for childcare and other planned one-off costs.
- £30,000 of accessible savings it is comfortable using for those needs.
Its illustrative shortfall would be £280,000: £180,000 + £90,000 + £40,000 − £30,000. This is not a recommended amount of cover. The figures could change significantly once you account for a partner’s earnings, existing insurance, the mortgage term, inflation and how the benefits would be paid.
Should you choose one policy or several?
Some households consider separate policies to protect different needs, such as a decreasing benefit for a repayment mortgage and level or income-based cover for family spending. Joint first-death policies and two separate individual policies can have different effects on when benefits are paid and whether the surviving partner remains covered. Compare the arrangements rather than choosing automatically on price.
Does inflation change the amount you need?
Future living costs may be higher than today’s costs. Some policies offer increasing cover, sometimes alongside increasing premiums, but they differ in how that increase is calculated and capped. Think about both the future benefit and whether premiums are affordable over the whole term.
What about life insurance trusts?
Who receives the payout can matter just as much as how large it is. A suitable trust may help reflect your wishes, but its legal and tax consequences depend on the policy and circumstances. Read our life insurance trust guide and seek individual guidance.
Get help deciding on a cover amount
If you know roughly what you want to protect, start a personal life insurance quote request. You can select a cover amount and preferred term, and our team can help review whether those choices fit your requirements before obtaining quotations from our panel of UK insurers.
Discount Life Cover is a trading style of My Key Finance Ltd, authorised and regulated by the FCA (FRN 628996). This page provides general information, not a recommendation tailored to your circumstances.