How much life insurance cover do you need?

7 minutes

Looking to cover your outstanding mortgage balance or offer your family financial security? With a life insurance policy, you can do just that and much more

Whether you want to offset inheritance tax for your children or assist towards your funeral costs, your life insurance policy is designed to keep your family afloat when you pass away. One of the main things you’ll need to consider is the amount of cover you need. Find out the sorts of things you’ll need to bear in mind, when thinking about how much life insurance you’ll need in our guide.

The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser. 

Why do you need life insurance?

If you want to offer your family additional protection when you pass away, life insurance might be right for you. A pay out when you die can cover everyday family expenses, your mortgage loan, your funeral costs and more. Although we all hope to live long and healthy lives, it doesn’t hurt to plan ahead with insurance that pays out when you die to help your loved ones.

How much life insurance do you need?

The amount of cover you need depends on what you want your life insurance to do. For example, are you hoping it will cover the rest of your mortgage and leave your family with a bit extra? If the answer to this question, or another like it, is yes, this will help you determine how much you need.

Say you want to open a life insurance policy as a just in case whilst your children are young, you must consider how much your family relies on you financially. As a result, you might want to calculate:

  • Your total household income
  • Expenditure on bills and your home
  • Mortgage loan if you have bought your own home
  • Total amount spent on your children
  • Any other family-related bills you pay

Making these calculations will help you figure out how much life insurance you need. It’s a good idea to take out a policy with the right level of cover that meets your needs. You’ll be able to calculate the right amount of cover based on your current expenses.

What should you consider when calculating life insurance?

There are several factors that will affect how much life insurance cover you need. When you first take out a policy, you’ll need to consider what your death benefit will need to do for your family. For example, if you’re in your 40s, you might want your total amount to cover your mortgage and offer your family some financial stability in the event of your death.

These considerations will affect how much cover you need:

  • If you are currently single or in a relationship
  • Your chosen beneficiaries, for example, children or spouse
  • Any other dependants, such as elderly parents or next of kin for vulnerable adults
  • Total mortgage, debts or outstanding loans
  • If your beneficiaries will have to pay inheritance tax on your estate
  • Your family’s current lifestyle

How do you calculate the amount of life insurance you need?

The best way to calculate the amount of life insurance cover you need is to consider all your essential expenditure. For example, you’ll need to think about how much you pay each month for a mortgage and towards the care of any dependents, as well as other expenses like loans or day-to-day living. 

After you’ve calculated your expenses, you should have a total expenditure amount per year. This total gives you a rough idea of how much your family will need each year to get by. If you can, you could also add the cost of a funeral on top of this.

It’s worth remembering that your total cover will affect the amount you pay for your insurance in premiums every month. If you look to take out cover later in life, then this will be more expensive than if you select the same level of cover earlier on in your life. This is simply down to as you get older, there’s a greater risk you’ll pass away. Of course, if you smoke or have a pre-existing medical condition then this will also affect your premiums.

How much does life insurance cost per month?

Life insurance could cost as little as £5 per month. However, this depends on your personal circumstances, as well as the type of policy you buy and the amount of cover you want, how long you need it to last, plus a few other details.

How to determine your monthly premiums

1. Type of life insurance

Firstly, the cost of your life insurance premiums will depend on the type of policy you take out. For example, a ‘whole of life’ policy could cost you more in premiums as you’re covered for the rest of your life, whereas term life insurance will only cover you for the set number of years that you choose. Each of these policies will affect your premiums slightly differently. You’ll find the types of life insurance below:

Types of life insurance What does it offer? What will affect your premiums? 

Whole of life

  • Cover for life
  • Total amount that pays out on your death
  • Can offer financial stability for your family
Taking a policy out earlier in life will make monthly premiums cheaper than later in life.

Decreasing term life insurance

  • Cover for a pre-agreed term
  • The total amount decreases each year in a similar way that the amount you owe on a capital and interest repayment mortgage decreases over time.
  • Repay your debt if you pass away during the policy term
Your monthly premiums will be affected by the length of term you require. For example, a five-year policy might be more expensive per month than a 20-year policy.

Likewise, the initial amount of cover you need to cover your mortgage debt balance will determine how much your monthly premiums are. 
Increasing life insurance
  • Cover for a pre-agreed term
  • A death benefit that will increase over the term of your policy to keep up with inflation.
Your premiums will be higher as it’s much riskier to manage, due to inflation. Also, as your amount of cover increases, so will the amount you pay for it.


Similar to other life insurance policies, your total cover amount and the age you take out the policy will affect your monthly premiums. 
Level term life insurance
  • Cover for a pre-agreed term
  • Death benefit stays the same throughout your policy term and will pay out if you pass away before the term expires
  • Can be used to support your family if you pass away during your life insurance term
Your premiums will be fixed for the duration of the policy. How much you pay is determined by your total cover amount, any add-ons and the age you take out your policy.


2. The amount, your beneficiaries and other details

Next, you’ll need to consider how much you want your life insurance to cover, what its purpose is and who your beneficiaries are. As part of this process, decide if you want single or joint cover, meaning you and another person are covered under the same policy, and it will pay out if either of you die.

3. Add-ons

After you’ve reviewed this, it’s worth thinking about the add-ons you might want. For example, you can add critical illness cover to your policy, protecting you if you’re diagnosed with a life-altering illness in the future. You may also want to consider adding critical illness cover for any children you have or plan to have.

Supplying all this information to a financial adviser or an insurance provider will help you understand your monthly premiums. It’s worth remembering that life insurance quotes will change over time and could increase or decrease.

How do you apply for life insurance?

You can purchase a life insurance product from many providers, but it’s a good idea to speak to a financial adviser first. They’ll offer you guidance on the type of life insurance you need, as well as the total cover and how much you might expect to pay in premiums based on your age, whether you smoke and your lifestyle. For them to calculate this, you’ll need to let them know:

  • Your total household income
  • Your family situation and number of dependents
  • The amount left to pay on your mortgage
  • Any other life insurance policies you own
  • An idea of the lifestyle you live and how much it costs

At LV=, we’ve partnered with LifeSearch who offer independent and non-judgmental advice.

What can your life insurance policy cover?

When you start a life insurance policy, you’ll purchase a total cover amount. This amount is based on how much your loved ones would need to live and pay household expenses. Your agreed amount can be set aside for a specific purpose or simply to help your beneficiaries out when you pass away. Here’s what your life insurance can do:

Safeguard your family’s future

If you pass away during the term of your life insurance policy, your death benefit can be used to look after your family and their expenses. Your total cover amount can be put aside to pay for your children’s education or to secure the family home for your spouse, for example.

Cover death expenses

Life insurance policies are often in place to help your loved ones cope if your death is sudden and unexpected. Unfortunately, untimely deaths can be costly and it’s your nearest and dearest that will have to front the bill. Funeral arrangements and settling any debts can all be covered by your life insurance policy.

Pay towards your mortgage

If you’ve got a capital and interest repayment mortgage and specifically choose a decreasing-level life insurance policy, your life insurance coverage will decrease over the policy term, in a similar way to the total amount you owe on your mortgage reduces as you continue to pay off your mortgage. It is ideal if you want to cover any big financial commitments, such as a mortgage or other loans.

Pay off or reduce other debts

The average debt in the UK sits around £34,566, not including a mortgage, which can be a hefty responsibility for your loved ones to carry. That’s why life insurance is beneficial. If you pass away with large debts, your life insurance policy can be used to pay off or reduce anything you owe. 

Cover for your child’s future

Every parent wants to offer their child security. With a life insurance policy, you can do exactly that. Many parents now take out life insurance when their children are young to cover them in case tragedy strikes. Life insurance protects your family and you can also protect your children with critical illness cover too.

Can you add critical illness cover to your life insurance policy?

You can add critical illness cover to most life insurance policies, which can even offer protection for your children. Critical illness cover is designed to be added to a policy either at the start or after the policy has started if you are planning to have children in the future. The total number of conditions covered will depend on your insurance provider as well, so it’s worth checking to see what illnesses and diseases you’ll be able to claim against.

If you remove critical illness cover from your policy, you might not be able to add it back on without taking out a new policy.

Life insurance cover amount FAQs

Is there a minimum amount of life insurance you need?

If you’re planning to take out a life insurance policy, you’ll need to consider what your death benefit will be used for. Doing this will help you understand the minimum amount of life insurance you need. 

Some providers have a minimum amount of life cover that they are prepared to offer, and they might also have a maximum amount they are willing to cover you for. This varies by insurer, so it’s important you check this.  

Can you claim a policy early?

There are two answers here: yes and no. You can claim a policy early if you have the critical illness add-on and fall ill with a condition covered by your insurer. You may be paid your lump sum ahead of time to help with funeral arrangements, cost of care or to ensure your family is prepared.

There are a few circumstances where you won’t be able to claim your policy early:

  • If you’re diagnosed with a condition that your insurer doesn’t cover
  • If you stopped paying your premiums
  • If you want to cancel your life insurance policy

Can you have a joint life insurance policy?

Many couples choose to have a joint life insurance policy so they’re both covered. If you take out a joint policy, the death benefit will typically pay out to the surviving partner. It’s worth noting that, if you’re covered by joint life insurance, it will only pay out once if you or your partner passes away before the insurance term ends. Your spouse or loved one can set up another life insurance policy after this point if it suits them to do so.

Who is your life insurance paid out to?

If you take out a policy on your own life, then usually it would pay to your estate when you die. If you take out a joint policy, it usually pays to the surviving policyholder. You can also take a policy out on the life of another person, and if they die it would pay out to you. However, to do this you’ll typically need to prove that you would suffer a financial loss in the event of their death (this is know as having an ‘insurable interest’). With some providers you may also be able to name specific beneficiaries to receive the proceeds, and you can place your insurance policy in a trust (however you should speak to a financial adviser, or a legal adviser before doing this).

Need an insurance policy that gives you peace of mind?

At LV= we have a selection of life insurance policies that are designed to meet your needs. Whether you’re looking into financial security for your family or want to make preparations for your loved ones, our life insurance policies guarantee peace of mind. 

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