Not sure how much life insurance cover to get?
Life insurance is a straightforward way to ensure some financial support will be there for your family in the event of your death. What isn’t always as straightforward is deciding how much cover you may need.
How to calculate your life cover
To begin calculating how much your life insurance policy should cover, first ask yourself why you need life insurance. Answering these 5 questions is a good place to start.
Working out how much life cover you need
The amount of cover you need will depend on your lifestyle and the stage of life you’re in.
For example, if you’ve just moved into your first home with your partner, the amount of cover you need may be very different to a family with four children.
- How much is left on your mortgage? For many people, one of the main reasons to take out life insurance is to help cover their mortgage payments — often their largest monthly expense. When calculating the life cover you need, look at how much you pay each month and the amount of time left on your mortgage.
- Do you have debts? Even if you don’t have a mortgage, you may have other financial commitments that would need to be paid in the event of your death. This could be a combination of bank loans, car finance, overdrafts and credit cards.
- What are your outgoings? It’s worth considering how much of your income is used to maintain your family’s lifestyle. Using a budget planner can help you to track your expenses and work out how much would be needed to cover these costs.
- Who depends on you? If your children are young and so very dependent on you the amount of life cover you need may be higher than if they’re older and more independent. And, if you look after the children every day, don’t forget to allow for the cost of childcare if you were no longer around.
- Do you have savings or other life insurance policies? These could be used to help your family cope with ongoing expenses or help finance your children’s future? If so, this could reduce the amount of cover you need.