How much life insurance do I need?

"How much life insurance do I need?" is the most common protection question we hear. The honest answer is that it depends on your mortgage, income, family structure, savings and pension, not on a round figure.

A good rough starting point: enough cover to clear the mortgage, plus 5-10 years of replacement income, plus a buffer for childcare, school costs and eventual education. For most Essex families with a mortgage and kids, that's typically somewhere between £300k and £750k of term life cover, but we'll do the actual sum with you rather than guess.

A simple way to think about it

The basic calculation has three parts:

1. Debt to clear. Outstanding mortgage balance plus any other significant debt (loans, credit cards) you'd want to clear on death. Most families just cover the mortgage.
2. Income replacement. Typically 5-10 years of the lower-earning partner's "need", not their gross salary, but what the family would actually need to live on if they weren't there. For most families this works out at 3-5× household net income.
3. One-off costs. Funeral (£4-8k), potential relocation, childcare gap cover, adjustments to the surviving partner's working hours, eventual education costs if relevant.

Worked example. Mortgage £280k. Household net income £50k. Two kids under 10. Cover needed = £280k + (£50k × 7 = £350k) + £30k buffer = £660k on the main earner. On a 25-year level term policy for a healthy 35-year-old non-smoker, that's often £15-£25 per month. Cheaper than you'd think.

Not all life insurance looks the same

Level term

Cover stays the same for the term (e.g. £500k for 25 years). Best if you want to cover family income and one-off costs that don't reduce over time. Slightly more expensive than decreasing term.

Decreasing term

Cover reduces each year to roughly match a repayment mortgage balance. Cheaper because the insurer's exposure falls as you age. Ideal for pure mortgage protection on a repayment loan.

Family Income Benefit (FIB)

Instead of paying a lump sum on death, FIB pays a regular monthly income until the end of the term. Often cheaper than level term for the same "value" to a family. Good for income replacement, less useful for clearing debts.

Whole of life

Pays out whenever you die, no end date. Significantly more expensive than term. Usually used for inheritance tax planning, funeral cover, or specific estate-planning cases. Not usually the answer for family/mortgage protection.

Joint vs single life

A joint life policy pays out once, then ends (usually on first death). Two single-life policies are slightly more expensive but pay out twice and survive separation. For most unmarried couples we recommend two single-life policies for this reason.

Written in trust

A policy written in trust pays out directly to your beneficiary, bypassing probate (faster, usually within weeks rather than months) and usually outside your estate for IHT. Trust paperwork takes 5 minutes and costs nothing. Always worth doing.

Common mistakes we see

From reviewing existing policies for new clients:

• Only covering the mortgage. Clears debt but leaves the family with no income. Add income replacement.
• Policy not written in trust. Payout goes into the estate, delayed by probate (6-12 months) and potentially subject to IHT. Trust is free and standard.
• Employer death-in-service treated as 'enough'. Usually 4× salary, only pays while you're with that employer, and gone the day you leave the job. Useful top-up, not a foundation.
• Under-cover on the non-working partner. A stay-at-home partner's death triggers nursery/childcare costs, house help, and often reduced working hours for the survivor. Worth £200k+ in cover easily.
• Set-and-forget. Life changes. Mortgage reduces. Children grow up. Review every 3-5 years or after a major life event.