How Much Life Insurance Do I Need?

How Much Life Insurance Do I Need?

How much life insurance do I need?

It can be intimidating looking into life insurance cover. Your online research presents you with a wide range of numbers, often with a worrying amount of zeros at the end. Life insurance aims to provide support for your loved ones after your death. This support could last for many years. That’s why the total cover looks like such a large amount. Don’t panic. Your Sherpa is here to help you.

In 2017, the average claim for a term life insurance policy was £78,223. Insurance companies paid out 98% of all registered claims. 1 However, that may be too much or too little for your needs. How do you know how much is enough?

Your life insurance should reflect your circumstances

When considering how much life insurance you need, think about why you are purchasing life insurance in the first place. What are your goals?

If you want to support your loved ones in the unfortunate event of your death, how much will it take? How long will they need support for? What standard of lifestyle do you want them to have?

Are you currently the primary income earner in your family? How will your loved ones replace that income?

Along with these considerations, remember that you will pay a monthly premium for your life insurance cover. You need to think about what you can afford to pay now.

Outgoings you may want to cover

Think about the money you spend at the moment. Which of these will your loved ones still have to cover if you suddenly died? How will they cope?


In 2018, the average outstanding mortgage debt was £124,732. 2 However, the value of your mortgage could be far more. You could have many years left before you pay it off.

For most people, their mortgage is their largest outgoing. Even in the event of your death, your mortgage carries on without you. If you do not want your loved ones to be liable for your mortgage, make sure your coverage takes account of this outstanding figure.

Some insurance companies offer life insurance where the premium falls in line with the mortgage. We call this ‘decreasing term’ life insurance. 3


Your mortgage may not be your only debt. If you owe money on loans, credit cards or any other type of debt, you should take them into account when calculating your life insurance needs.

Household bills

Bills are another significant living expense which your loved ones may have to cover after your death. Think about utility bills, council tax, even subscriptions to Netflix. If you are the primary contributor to these costs in your household, think about how much your next of kin will need to keep up these payments.


If you died, how do you want your loved ones to live? Do you want them to stay in the same lifestyle they have now? Or, would they need to make significant changes?

If you currently pay for childcare, school fees, regular holidays, think about whether you want your life insurance to keep these payments going. If you have children, do you want them to go to university?

Keep your current salary in mind. You can’t predict the future, but you can estimate the amount your loved ones will need to maintain their current lifestyle.

A simple way to calculate life insurance cover

If you have taken all these outgoings into account and still can’t decide how much life insurance cover you need, here are some simple ideas.

Cover your debts

If your life insurance cover can’t pay off your debts in the event of your death, it isn’t worth purchasing it in the first place. The outstanding amount on your mortgage and other debts should be the minimum amount of cover.

If you owe £200,000 on your mortgage, plus an outstanding £5,000 on a car loan, the lowest amount of cover should be £205,000.

10x your annual income

To pay off your debts and provide your loved ones with a reasonable income, take out life insurance for ten times your annual salary.

This amount will maintain the same lifestyle for your beneficiaries for ten years. This is enough time to make plans to replace your income.

So, if you currently take home £50,000 per year, take out life insurance cover for £500,000. The monthly premium should be affordable for you. However, make sure you do not overstretch yourself.

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1 – Thomas, Holly. “Mind the Life Insurance Gap.” Moneywise, 6 July 2018,

2 – Wolffowitz, Esther. “Life Insurance Statistics: Are UK Residents Well Protected? | Feb 2018.” Finder UK, 2 May 2019,

3 – Kagan, Julia. “Decreasing Term Insurance.” Investopedia, Investopedia, 12 Mar. 2019,