How much life insurance should I buy?

5 min Read Published: 02 Sep 2022

How much life insurance should I buy?Working out how much life insurance you should buy can be tricky but there are some simple steps you can follow that will guide you to the right amount of life insurance so that your family has enough money to pay off any debts as well as cover any future expenses. We will take you through these steps in this article.


1 min summary - How much life insurance should I buy?

  • Price comparison sites cannot tell you how much life insurance you should buy
  • The amount of life insurance you should buy is personal to you and should be based on the amount of money it would take to meet your financial obligations that would remain after your death
  • Consider insuring an amount that will pay off debts such as your mortgage as well as fund the living costs of anyone who depends on you financially
  • The easiest and best way to find out how much life insurance you should buy & get up to £100 cashback is to complete this simple form* and get free advice from an independent life insurance expert.

What is life insurance?

Life insurance is a type of personal insurance that pays a lump sum of money or an income over a period of time if you die whilst you are insured.

Life insurance can reduce the financial hardship caused by a person's death by paying off debts including a mortgage; funding living costs for dependents; covering funeral costs or simply creating financial security for their nominated beneficiaries.

Types of life insurance you should consider

You can buy life insurance that covers you for a specific period of time; usually, a number of years. The number of years is referred to as the ‘Term' and this type of life insurance is called Term life insurance. It will only pay out if you die within the term and it comes in a few different forms: Level term life insurance, Decreasing or Mortgage life insurance, Increasing term life insurance and Family income benefit.

You can also buy life insurance that covers you until you die called Whole of life cover or Over 50s life insurance and it will pay out when you die, whenever that happens.

You can read more about types of life insurance in our article, “Types of life insurance explained

How to work out how much life insurance you should buy

To work out how much life insurance you should buy to protect your family, you should consider the financial impact caused by your death. This is different for everyone and most online life insurance calculators may be too generic for you to work out how much life insurance you should buy.

Understanding what will need to be paid for and what potential changes will take place if you die is a good starting place to understand how much life insurance you should buy.

Among many different concerns and needs that people choose to protect with life insurance are:

  • An outstanding mortgage balance
  • Outstanding debts
  • Living costs for dependents
  • Future costs such as weddings and further education
  • A potential inheritance tax bill
  • Funeral expenses

You may need some assistance to work out how much life insurance to buy and we will explain the best way to get help with this later in the article.

Steps to work out how much life insurance you should buy

You should consider the following when working out how much life insurance you should buy:

  • Debts – Your mortgage balance, credit cards and loans should be fairly simple to add up and you should also note how many years are left before these debts are repaid so that you can choose an appropriate term for your life insurance policy.
  • Living costs – This can be slightly more tricky to work out but consider that your debts will be repaid so you don't have to account for mortgage payments or loan payments. Work out how much money your dependents will require to maintain their lifestyle either monthly or annually. Importantly, give consideration to what changes may take place without you – will your partner have to give up work? Will they move home or downsize? Might they need to pay for additional support such as childcare?
  • Future costs – This can be less predictable but choose an amount of money that you feel would assist your family financially to do the things that you have perhaps planned for them. Further education, for example, could be around £10,000 per year over 4 years.
  • Inheritance tax – This doesn't apply to everyone as there are thresholds, below which there is no need to pay inheritance tax and none is payable if you are passing assets to a spouse. However, if you think that you may need to make some provisions for this, use our “Inheritance tax calculator
  • Funeral arrangements – This can cost upwards of £2,000 depending on the type of funeral that is arranged but the average cost of a funeral in the UK is around £4,000. If you want to know more about funeral life insurance, you will find it in our article, “Life insurance or funeral plan – which is best?
  • Do think of anything else that you feel you need to create financial means for outside of these most common concerns as you may have some that are personal to you. For example, continuing a non-essential financial commitment like paying for your niece's piano lessons or ensuring that your pets are looked after.

Buying the right amount of life insurance for you

Now that you've worked out how much money you may need to leave behind in the event of your death, this needs to be converted to a life insurance solution that covers your needs but also doesn't break the bank. I've seen many people struggle with life insurance calculators that tell them they need millions of pounds worth of life insurance but if we all bought that, we would probably spend a small fortune on life insurance premiums.

Comparing life insurance quotes online can seem easy on the surface but most online comparison sites will not provide advice and guidance on which policies are better for you and you may need more than one life insurance policy to keep your costs down and make your life cover relevant.

Important factors to consider when buying life insurance

Vitally, if you have pre-existing health concerns or a history of medical conditions, you will need help to select the life insurance company that is going to give you the fairest price. Life insurance companies use different guidelines to assess your health, occupation and lifestyle before offering you life insurance and some will increase the initial price if their guidelines indicate this. Importantly, this isn't the same for all insurers and so you should shop around.

Ideally, you should speak to an independent life insurance specialist* as they will find the best types of life insurance and the right level of cover to suit your needs. Some types of life insurance will cost much less than others – an income life insurance can provide a large amount of life insurance at a much smaller monthly premium than a lump sum life insurance and could be a more manageable payout for your dependents too.

There are other considerations too, such as the inclusion of protection against serious illness using critical illness cover or how long you buy your life cover for. There are also merits to considering the difference between a joint or a single policy if you are buying your life insurance with a partner. Speaking to a life insurance specialist can help you to make sense of how much life insurance you should buy to give you peace of mind. They will compare life insurance quotes from all the life insurance companies in the market and ensure you don't overlook any small print that affects your insurance policy.These experts will also provide guidance to arrange a Trust, free of charge so that you can nominate your beneficiaries, ensuring they receive the money quickly if you die and without becoming liable for inheritance tax.

Furthermore, as a Money to the Masses reader, you will receive up to £100 cashback if you decide to buy your life insurance this way.


If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. This link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article