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Life Assurance · 6 min read

How much life insurance do I need?

“Ten times salary” is a guess dressed up as a rule. Here's the calculation that gives you a figure you can defend — and the term length that goes with it.

Last updated: August 2026

The formula

Debts + income replacement + one-off costs − existing cover and savings = the sum assured.

Then set the term to the date the need ends — the mortgage term, or your youngest child reaching independence, whichever is later.

Step 1 — Debts that would have to be cleared

  • The outstanding mortgage balance — the largest item for most households
  • Secured loans and second charges on the property
  • Car finance, personal loans and credit cards
  • Any debt held jointly, which passes in full to the surviving borrower

Note that debts in your sole name are usually settled from your estate rather than inherited — but if the estate is mostly the family home, settling them can mean selling it. That is the outcome the cover exists to prevent.

Step 2 — Income your dependants would lose

Take the share of your income the household actually spends on living costs, then multiply it by the number of years your dependants would still need it.

A household needing £2,000 a month from you, with a child who is eight and would need support to 21, is £24,000 a year for thirteen years — around £312,000 before any allowance for investment returns or inflation.

That figure is why family income benefit exists: insuring a monthly income for thirteen years costs less than insuring the whole £312,000 as a lump sum on day one.

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Step 3 — One-off costs

  • Funeral costs — commonly £4,000–£5,000 for a burial or cremation in the UK
  • Childcare that a surviving partner would have to buy in to keep working
  • University support, if you intend to provide it
  • Probate and estate administration costs
  • Any inheritance tax your estate would face, if it exceeds the available allowances

Step 4 — Subtract what already exists

  • Death-in-service cover from your employer — count it, but remember it leaves with the job
  • Existing personal policies still in force
  • Pension death benefits, which can be substantial and are often overlooked
  • Savings and investments your dependants could access
  • Mortgage payment protection already attached to the loan

Worked example

Alex and Jo, both 36, two children aged 4 and 7. Alex earns £48,000; Jo works part-time earning £16,000. Mortgage £215,000 with 22 years to run.

Mortgage balance£215,000
Car finance and credit cards£14,000
Income replacement (£21,600/yr × 17 yrs)£367,000
Childcare and university support£40,000
Funeral and estate costs£6,000
Less: death in service (3 × salary)−£144,000
Less: savings−£18,000
Cover needed on Alex£480,000

In practice an adviser would likely structure this as decreasing term for the £215,000 mortgage plus level term or family income benefit for the rest — cheaper than a single £480,000 level policy for 22 years. Jo would need separate, smaller cover for lost income and childcare.

Getting the term right

Term length matters as much as the sum assured, and it is where most self-selected policies go wrong. Two rules cover almost every case:

  • Mortgage cover runs for the remaining mortgage term. If you remortgage and extend, revisit it.
  • Family cover runs until your youngest is financially independent — 18, or 21 to 23 if you are funding university.

Where those dates differ significantly, two shorter policies usually cost less than one policy running to the later date at the full sum assured.

Frequently asked questions

How much life insurance do I need?
Add up what your death would cost the people left behind: outstanding mortgage and debts, the annual income your dependants would lose multiplied by the years they would need it, childcare and education costs, and funeral expenses. Then subtract existing cover, savings and any death-in-service benefit. The remainder is the sum assured to insure.
Is 10 times salary a good rule of thumb?
It is a starting sanity check, not an answer. Ten times salary can be far too little for someone with a large mortgage and young children, and far too much for someone with no dependants and a nearly-repaid home. The debts-plus-dependants calculation gives a figure you can actually justify.
How long should the policy term be?
Run it to the point the need disappears. For mortgage cover, that is the remaining mortgage term. For family protection, it is until your youngest child is financially independent — typically age 18, or 21 to 23 if you want to cover university. If you have two needs with different end dates, two policies are often cheaper than one long one.
Do I need life insurance if my employer provides death in service?
Death in service is genuine cover, usually two to four times salary, but it is tied to the job — it ends the day you leave, and it is rarely enough on its own for a household with a mortgage and children. Count it in your calculation, then insure the gap with a personal policy you keep whatever happens to the job.
Should I include my partner's income in the calculation?
Yes, but realistically. Ask what your partner could actually earn after your death, given childcare they would have to fund or hours they would have to drop. The gap between that and what the household needs is the income element of the cover.
Does a stay-at-home parent need life cover?
Frequently yes. A stay-at-home parent provides childcare and household work that would otherwise have to be bought in, and replacing it can cost a five-figure sum every year until the children are older. The cover is usually smaller than for the earning partner, but it is rarely zero.
Should I increase cover for inflation?
On a long level-term policy, indexation is worth considering — a sum assured that looks generous today buys noticeably less after twenty years of inflation. Index-linked cover rises each year along with the premium; the alternative is reviewing the amount every few years and topping it up.

Related guides

Guide
Types of life insurance in the UK

Level, decreasing, family income benefit and whole of life compared.

Guide
Writing life insurance in trust

How a trust keeps the payout out of your estate and away from probate delays.

Get the calculation checked

Charles Frank Finance's advisers will size and structure the cover with you and search the whole market — no obligation.

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Important: This guide is for information only and does not constitute financial or tax advice. The worked example is illustrative and ignores investment growth and inflation. Inheritance tax treatment depends on individual circumstances and may change. CleverCompare is an introducer appointed representative of Charles Frank Finance Limited, which is authorised and regulated by the Financial Conduct Authority.
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