How much life insurance cover do I need?

Life insurance pays a one-off cash sum to the people you name if you die during the period the policy runs for. The amount it pays, called the sum assured, is the figure you choose when you take the policy out, and it is the single biggest thing, along with your age and health, that determines what you pay each month. There is no official amount you must have: life insurance is not a legal requirement, unlike car insurance, and the right figure depends entirely on what your family would owe and what they would lose¹.

A well-established quick approach is to take your annual salary and multiply it by ten². That gives a rough anchor, but it ignores your debts, your partner's earnings, how many years your family would need support, and any cover you already have through work. A more reliable figure comes from adding up what would need paying off, what income would need replacing, and what one-off costs would arise, then subtracting what you already have.

This page works through that calculation step by step: what to count, how the type of cover and its length change the figure, what it does to the premium, and where life cover does not pay out at all.

What life cover pays out and when

Life insurance usually pays out only when you die, as a single lump sum⁵. That is its whole job: money arriving at the moment your family loses your income or has to settle what you owed. Macmillan sets out the two main uses: to pay off your debts, such as a mortgage, and to provide money for your family⁵. Legal & General describes it in the same terms, as a cash sum paid if you die while covered by the policy⁷.

Most life insurance sold for family protection is term insurance: it runs for a set number of years and pays out only if you die within them. Whole-of-life cover is different. It pays out an agreed amount whenever you die, provided you have continued paying the premium, and some policies stop taking money when you reach 90³. Because a whole-of-life payout is certain, it costs more than term cover for the same sum, and it is often used for inheritance tax planning rather than family protection. Some high-net-worth individuals take out life insurance specifically to cover the inheritance tax their family will have to pay on their estate⁴.

Many term policies also include terminal illness benefit. This pays out the full amount of life cover early if you are expected to live less than 12 months, and you keep the money even if you live longer⁵. It is not the same as critical illness cover, which pays a lump sum if you develop a listed life-changing illness and is usually sold alongside life insurance⁸. The dedicated pages on how life insurance works and terminal illness payouts cover both in more detail.

Working out your figure: debts, income and family costs

The sum assured needs to answer one question: what would your family be short of if you died tomorrow? That shortfall has three parts.

Debts first. Anything in your sole name that would fall on your estate or your family goes in the total: the mortgage, personal loans, credit cards and any overdraft. In Northern Ireland, nidirect explains what happens to debts after a death: if a mortgage lender required life insurance, it may pay off the full amount of the loan, but if there is no insurance, or a second mortgage is not covered, the property may have to be sold⁹. That is the practical case for making the mortgage the first item in your figure.

Income to replace. The second part is the earnings your family would lose. The salary-times-ten shortcut is one way to size this², but a more precise approach is to work out how many years your family would genuinely rely on your income, for example until children are financially independent or a partner's own income could cover the household, and multiply your yearly contribution by that number. A household budget exercise, of the kind Business Debtline suggests for anyone weighing up what they can afford, helps here: list what actually arrives and leaves each month before deciding what a payout would need to cover¹⁰.

Family costs. Add one-off and ongoing costs that would not exist if you were still there: childcare so a partner could keep working, and a funeral. If you are covering a specific debt rather than income, the sum insured should match the amount borrowed⁴.

Then subtract what you already have. Death in service benefit from an employer, savings, and any existing policies all reduce the amount you need to buy. Life insurance policies that have not been cashed in are treated separately from savings for means-tested benefit purposes, so a policy you hold counts as an asset in its own right¹¹. You can also hold more than one policy: it is perfectly possible to have a joint policy and a single policy at the same time, or several single policies covering different needs⁶.

One caution on the income side: if your family's finances are already stretched, the figure you arrive at may be more than you can afford to insure. Research for the debt advice sector found that 73% of adults with a definite need for debt advice have a household income of less than £30,000 before tax¹², a reminder that the cost of the cover has to fit the budget alongside the sum. A smaller policy that is paid every month beats a larger one that lapses.

Covering a mortgage: decreasing cover and how it tracks the loan

If the purpose of the policy is specifically to clear a repayment mortgage, the cover does not need to stay level. Decreasing term insurance is designed for exactly this: the amount you are covered for goes down as you pay off your mortgage⁵. Nationwide describes its Mortgage Life Insurance in the same terms, as decreasing cover designed to help pay off your repayment mortgage if you die during the policy¹³, and TSB, Legal & General and LV= all state that the amount of cover reduces roughly in line with the way a repayment mortgage decreases¹⁴.

The mechanics are straightforward. With a repayment mortgage, the balance you owe falls every year as you make payments, so the insurance that tracks it falls too. Cavendish gives a worked example: a policy taken to cover a £250,000 repayment mortgage, where the amount owed has fallen to £234,000 after the first year of repayments¹⁷. The cover follows the loan down, and because the insurer's likely payout shrinks over time, the monthly premium is lower than for level cover of the same starting amount.

Two warnings come with this type of policy. First, the reduction is only "roughly" in line with the mortgage: the policy assumes a rate at which the debt falls, and Legal & General warns that the policy may not completely pay off the outstanding mortgage unless the cover amount is adjusted to match any new mortgage arrangements, and to check that the mortgage interest rate does not become higher than the rate applied to the policy¹⁴. If you remortgage to a larger loan or a longer term, the original policy may no longer match the debt. Which?'s guidance is blunt on this point: never cancel a policy without having secured a replacement first⁴.

Second, decreasing cover only suits a repayment mortgage. An interest-only mortgage does not reduce over time, so level cover is the natural match there. The comparison page on level versus decreasing term life insurance and the guide to mortgage life insurance set the two side by side.

Level, increasing or decreasing cover: how each one behaves

Once you have a figure, you choose how that figure behaves over the years. Most insurers offer three shapes. Lloyds Bank, for example, offers cover on a level, increasing or decreasing basis, single or joint¹⁸, and the Post Office offers level, decreasing or increasing term insurance¹⁹.

• Level cover pays the same amount whenever you die during the term. It is usually more expensive than decreasing cover, and it does not go up with inflation, so the payout buys less as the years pass¹⁶.
• Decreasing cover falls roughly in line with a repayment mortgage, as above¹⁴.
• Increasing cover rises each year to keep pace with prices. Legal & General's version increases in line with changes in the Retail Prices Index each year, up to a maximum of 10%²¹. Royal London's advised cover lets you choose the amount of cover to increase, decrease, or remain at the same level over the term²².

The choice matters most for income replacement. If you are insuring a sum that your family would live on for years, inflation quietly erodes a level payout: £250,000 buys noticeably less in year 20 than in year one. Increasing cover protects against that but costs more at the outset. If you are insuring a shrinking debt, decreasing cover does the job for less. The page on level or increasing cover works through the inflation question in detail.

Term length: match it to the debt or the need

The term is the number of years the policy runs. Some insurers offer cover stretching from five years all the way up to 70 years³, and terms can be set as a number of years, for example 15, 20 or 30, or until a certain age such as 50, 60 or 70²³.

The principle is to match the term to the need. For a mortgage, the term is set to the same as the mortgage, say 25 years, and the sum insured should match the amount borrowed⁴. For family protection, the term should run until the need disappears: until children are independent, or until a partner's pension and savings could take over. A term that ends too early leaves a gap; a term that runs too long pays for cover you no longer need.

LV= offers terms between 5 and 50 years on its life insurance and life with critical illness cover¹⁶. Whole-of-life cover, by contrast, has no term at all: it runs until you die, with premiums on some policies stopping at 90³. The comparison of term versus whole of life insurance explains when each tends to be used.

What your cover amount does to the premium

The more cover you buy, the more you pay: the amount of cover you need is one of the direct inputs to the price. Santander lists the factors as how old you are, your overall health, what your lifestyle looks like, and how much cover you need²⁴. Which? adds the rest: premiums depend on your age, health, lifestyle and how much cover you need, as well as the policy type, your family health history, the term length, your job and any extras⁸.

This is why the calculation in the earlier section matters. Doubling the sum assured does not double the premium in every case, but it always raises it, and the effect compounds with age and health. Someone with a medical condition faces the same arithmetic from a higher starting point: Macmillan notes that if you can get life insurance after cancer, you are likely to pay more than the average monthly premium⁵, and the Mental Health and Money Advice service says the same for people applying with a mental health condition²⁵. People with pre-existing conditions can still access level term, decreasing term, increasing term or whole-of-life cover²⁶, but the premium reflects the insurer's assessment of the risk.

The type of cover also moves the price. Level cover is usually more expensive than decreasing cover¹⁶, and increasing cover costs more still because the payout grows. Guaranteed acceptance policies, sold without medical questions, are more expensive still for the cover they provide²⁷. The guide to how life insurance premiums are worked out covers the pricing in depth.

Age limits and how much insurers will cover

Age sets the boundaries of what you can buy. Lloyds Bank requires applicants to be aged 18 to 79 for life cover, and 18 to 64 for critical illness cover¹⁸. Legal & General's minimum age is 18, though it notes that a "life of another" policy can be taken on a 17-year-old by an adult with an insurable interest²¹.

At the other end of life, whole-of-life cover continues to be available at older ages, with premiums on some policies ceasing at 90³. Over 50s plans, which accept applicants without medical questions, are designed for this market, but Which? flags a key issue: they often pay out less than you have paid in premiums, and Which?, along with many financial commentators, does not advise buying this kind of product²⁷. The comparison of over 50s plans versus term cover sets out the trade-offs.

Insurers also cap the total amount they will cover a person for, and they look at whether the sum matches your circumstances, so a figure far above your income and debts may prompt questions. The practical point for most people is simpler: the older you are when you apply, the more each year of cover costs, which is an argument for settling the figure and the term sooner rather than later, but only once the calculation supports it.

Raising your cover when your life changes

Life cover is usually fixed at the outset. In most cases the level of cover cannot be increased without taking out a new policy²¹, and Bank of Scotland states that you cannot change your policy after it has started²⁸. A new policy later in life means a new premium based on your then age and health, which is why getting the figure right first time matters.

Some policies soften this with guaranteed insurability options. Barclays' life insurance for mortgage holders lets customers increase their cover amount without further reassessment or application, up to a maximum total increase of £200,000²⁹. These options typically trigger on significant life events, such as moving to a bigger mortgage or having a child, and some policies allow increases on such events depending on the insurer and the policy terms²¹.

If your circumstances change and your policy has no increase option, the usual route is a second policy alongside the first. Multiple policies are entirely normal: you can have a joint policy and a single policy at the same time⁶, and layering cover, a large policy while children are young, a smaller one later, is a recognised way of matching cover to a changing need. The page on changing your cover and the guide to guaranteed insurability options cover the mechanics.

Couples: one joint policy or two single ones

Joint life insurance is a policy taken out by two people, typically a couple, that pays out upon the death of the first policyholder during the term. The policy then ends: it does not cover the surviving partner²⁰. Although two lives are covered, there is only one payout, which is after the first partner dies³. Even if both policyholders die during the term, only the single payment is made²⁰.

The advantage is cost. Taking out a joint life insurance plan normally costs less than two single plans¹⁶. Which? priced the alternative in July 2025: two single life policies for £250,000 each, paying out a maximum of £500,000 in total, attracted a combined monthly premium of £18.90 for a couple both aged 32 and non-smokers over a 25-year term, including a multi-plan discount²⁰.

The trade-off is what happens after the first death. The survivor is left with no cover, at an older age and possibly in poorer health, so replacing it means a new policy priced on their circumstances alone. Two single policies cost more each month but each partner is covered in their own right, and each policy pays out independently. Some joint policies include a terminal illness clause, allowing a payout if one policyholder is diagnosed with a terminal illness and given less than 12 months to live²⁰. The guide to joint life insurance works through the choice, including what happens to a joint policy after a break-up.

Where life cover does not pay out

Life insurance pays out on death, and usually nothing before it. Which? makes the point sharply in the mortgage context: life insurance is not an alternative to mortgage payment protection for the simple fact that it only pays out when you die³⁰. If you need cover for illness or for losing your income while alive, that is what income protection and critical illness cover are for.

Policies also carry exclusions. Which? lists the common ones: suicide within the first two years of the policy, illegal or criminal activities, dangerous activities, death outside the coverage area, and misrepresentation or fraud in the application⁸. Non-disclosure matters on both ends: if the policy lapses due to non-payment of premiums, coverage stops and no benefits will be paid upon the policyholder's death⁸, and if you did not answer the insurer's medical questions honestly, the payout itself can be refused. The page on answering an insurer's questions honestly explains the duty.

Two further limits are worth knowing. First, most life insurance has no cash-in value: if you cancel, the policy simply stops and you do not get any money back²⁷, and if you outlive the term, the policy ends without a payout. Only certain whole-of-life policies have a surrender value, and any payment on cancelling before 90 is based on fund performance and is often less than the premiums paid⁸. Second, a payout is not always instant. The regulator has flagged long delays in life insurance payouts, with average claim processing times for term insurance running at 53 to 122 days³¹. The guides to claiming after a death and how long a claim takes cover the process, and the page on life insurance and FSCS protection explains what happens if the insurer itself fails.