Working out how much life insurance you need comes down to one question: if your income stopped, how much money would the people who depend on you need to stay financially secure? Too little cover leaves a gap; too much means paying for protection you'll never use. The aim is to size a policy to your real commitments — your mortgage, your debts, your family's living costs and any big future expenses.
This is general information to help you estimate a figure, not personalised advice. The right amount depends on your circumstances, and an adviser can help you refine it. This guide builds on our overview of whether you need life insurance.
A simple method for sizing cover
A reliable way to reach a figure is to add up what your family would need, then subtract what they'd already have. Advisers sometimes call this the "needs" approach, and it's more accurate than a rough multiple of salary.
Step 1 — Add up what you'd want to provide:
- Mortgage — the full outstanding balance, so the home is secure.
- Other debts — loans, credit cards or anything you wouldn't want to pass on.
- Income replacement — enough to replace your income for the years your family would need it. A common approach is your annual take-home pay multiplied by the number of years until the children are independent.
- Future costs — one-off or ongoing expenses such as childcare, university or a funeral.
Step 2 — Subtract what's already in place:
- Savings and investments you'd be happy to use.
- Existing life cover, including any death-in-service benefit from your employer (often around three to four times salary).
- Other assets that could be realised.
The difference between the two totals is roughly the amount of cover a new policy might need to fill.
A worked illustration
Consider a couple with two young children and a repayment mortgage. The figures below are illustrative only.
- Outstanding mortgage: £220,000
- Other debts: £10,000
- Income replacement (£30,000 net x 12 years): £360,000
- Future childcare and education: £40,000
- Total need: £630,000
Now subtract existing resources:
- Savings: £20,000
- Death-in-service (4 x £40,000 salary): £160,000
- Total resources: £180,000
Estimated cover required: £630,000 − £180,000 = £450,000.
This gives a realistic starting figure to discuss, rather than guessing. A life cover calculator can do the same sums quickly, and an adviser can then stress-test the assumptions — for example, whether death-in-service would continue if you changed jobs, since it usually wouldn't.
Level or decreasing — matching the shape of the need
The amount isn't the only decision; the shape matters too.
- Decreasing cover reduces over time to track a falling repayment mortgage. It's typically cheaper and suits the mortgage portion of your need.
- Level cover stays the same throughout, which suits income replacement and family costs that don't shrink, or an interest-only mortgage.
Many people combine both — decreasing cover for the mortgage and level cover for the family — so each part matches what it's protecting.
Single or joint policy?
Couples often ask whether to take one joint policy or two single ones.
- A joint policy is usually slightly cheaper and simpler, but it typically pays out once, on the first death, and then ends — leaving the survivor without cover.
- Two single policies cost a little more but pay out on each death, can be arranged in trust more flexibly, and stay in place if you separate.
For many families, two single policies offer better protection for a modest extra cost, but the right choice depends on budget and circumstances.
Writing cover in trust
Placing a policy in trust means the payout goes to your chosen beneficiaries rather than into your estate. This can help the money reach them faster, keep it outside your estate for inheritance tax purposes, and give you control over who benefits. It's usually straightforward to set up at outset and costs nothing to arrange. Our guide to life insurance in trust explains how it works.
Review your cover over time
The right amount today won't be the right amount forever. It's worth revisiting your cover when you:
- Move home or change your mortgage.
- Have a child or your family grows.
- Get a significant pay rise or change employer.
- Pay off other debts.
Regular reviews keep your protection matched to your life, so you're never badly over- or under-insured.
Get your figure checked
A quick calculation gets you close, but an adviser makes sure the assumptions hold up. Wisely is an independent, whole-of-market protection specialist — we'll help you size cover to your real commitments, compare policies from many insurers, and set it up correctly, including in trust where appropriate. Premiums and terms depend on your circumstances and underwriting.
To put a reliable figure on your cover, book a free, no-obligation call with a Wisely adviser on 023 8268 1111. Big decisions, made wisely.
This guide is general information, not personal financial advice.
Frequently asked questions
Is a multiple of salary a good way to size life insurance?
A salary multiple is a rough guide, but it ignores your actual mortgage, debts and family costs. A needs-based calculation — adding your commitments and subtracting existing resources — usually gives a more accurate and appropriate figure.
Should I include my employer's death-in-service benefit?
You can count it as existing cover, but remember it usually stops if you leave that employer and isn't guaranteed for the long term. Many people keep some personal cover so they aren't left exposed if their job changes.
Do I need to cover my whole mortgage?
Most people want enough to clear the outstanding balance so the home is secure. Decreasing cover can track a repayment mortgage so the sum assured falls as the balance does, which typically keeps premiums lower.
Is a joint or single policy better?
Joint policies are often slightly cheaper but usually pay out only once, on the first death. Two single policies cost a little more but pay out on each death and offer more flexibility, which suits many couples — though the right choice depends on your circumstances.
How often should I review how much cover I have?
Review it after any major life change — moving home, a new mortgage, a new child, a pay rise or clearing debts. A quick check every few years helps keep your cover matched to your commitments.