The simple rule of thumb
A common starting point is 10 times your annual income. So if you earn £40,000 a year, you'd look at £400,000 of cover. But this is a rough guide — your actual needs depend on your individual circumstances.
Step 1: Cover your mortgage
If you have a mortgage, the first priority is ensuring it can be cleared if you die. This prevents your family from having to sell the home. Many people choose a separate decreasing term policy that tracks their mortgage balance.
Step 2: Replace your income
Think about how long your family would need financial support without your income. Multiply your annual income by the number of years until your youngest child is financially independent — or until your partner reaches retirement.
Step 3: Account for childcare costs
If you're a stay-at-home parent or primary carer, the economic value of what you do is often underestimated. Full-time childcare in the UK can cost £1,000–£2,000 per month. Even if you don't earn an income, you need adequate life cover.
Step 4: Factor in debts and final expenses
Add any outstanding debts (car finance, credit cards, personal loans) and an estimate for funeral costs (typically £4,000–£9,000 in the UK).
Step 5: Subtract existing cover
Deduct any death-in-service benefit from your employer (often 2–4 times salary), existing life policies, and significant savings or investments your family could draw on.
Your total figure
Add steps 1–4 and subtract step 5. This is your approximate cover requirement. It's always better to slightly over-insure than to leave a gap.
How long should the policy last?
The term should run at least until your mortgage is paid off and your dependants are financially independent. Most people choose a policy term of 20–30 years.
Frequently Asked Questions
It depends on your mortgage, income, and family circumstances. For a high earner with a large mortgage and young children, £500,000 may not be enough. Use our step-by-step guide to work out your actual needs.
You can over-insure, which simply means paying more premiums than necessary. Insurers won't pay out more than the 'insurable interest' — but for personal life cover on a spouse or dependant, this is rarely a concern.
Yes — particularly if you're a stay-at-home parent or your partner would need to pay for childcare without your income. This is often overlooked but can add up to significant sums.