CalcBritain

Life Insurance Calculator

Work out a recommended sum assured, income replacement, your mortgage and debts, funeral costs and your children's future costs, minus any existing cover and savings.

A guide, not advice. This is a guide to how much cover you might need, not advice or a quote; speak to a regulated adviser. Figures are indicative only and use a UK average funeral cost of £4,000.

Enter your annual net income

Your recommended life insurance cover and a full breakdown appear here as you type.

How much life insurance cover do you need?

There's no single right answer, but a common starting point is the "income replacement" method used here: add up what your family would need to replace your income for a set number of years, clear the mortgage and any other debts, cover funeral costs, and fund your children's future costs, then subtract any life cover you already have and savings or other assets you could draw on. The result is a recommended sum assured: the amount your policy should pay out. How many years of income to replace is a personal choice, many people choose until their youngest child turns 18 or 21, or until the mortgage is due to be paid off. This calculator gives you a starting figure to take to an adviser or comparison site, it is not personal advice and doesn't account for your health, existing policies, inflation or tax.

How much life insurance you actually need

There is no universal multiple of salary that works. The needs-based method this calculator uses asks a more useful question: if you died tomorrow, what lump sum would leave your household financially where it is now? You add up what has to be paid or replaced, then subtract what is already in place.

The four components are income replacement, debts that must be cleared, one-off costs such as a funeral, and future costs you were going to fund anyway, most often childcare or education. Against that you offset existing cover, including anything provided through your employer, and savings or investments your family could realistically draw on.

Rules of thumb like ten times salary exist because they are quick, not because they are accurate. They ignore whether you have a mortgage, whether your partner earns, and how many years of dependency are actually left. A household with a paid-off house and grown children needs far less than the multiple suggests; one with a large mortgage and young children often needs considerably more.

Choosing how many years of income to replace

This is the single input with the largest effect on the answer, and it is a judgement rather than a calculation. The two most common anchors are the number of years until your youngest child is financially independent, and the number of years left on the mortgage.

If your partner works and would continue to, you may only need to replace the shortfall rather than your whole income. If they would have to stop working or cut their hours to care for children, the need is larger than your salary alone suggests, because you are also replacing the earnings they would lose.

Replace net income rather than gross. A life insurance payout is not taxed as income, so the household needs to replace what actually arrived in the bank account, not the pre-tax figure. Using gross salary systematically over-insures and pushes the premium higher than it needs to be.

Count what you already have before buying more

Death in service cover through an employer is commonly two to four times salary, and it is the most frequently forgotten asset in this calculation. It is worth confirming the exact multiple, because it is also the cover you lose the day you change jobs, which is a reason to treat it as a supplement rather than a foundation.

Existing personal policies count too, including any decreasing-term policy taken out alongside a mortgage. Check whether the sum assured still matches the balance, because a policy set up against a mortgage that has since been increased may now fall well short.

Savings, investments and pension death benefits reduce the gap as well. Defined contribution pensions can usually be paid to nominated beneficiaries outside your estate, so make sure the expression of wish form is current. An out-of-date nomination is a common and entirely avoidable problem.

Term, whole of life, level and decreasing

Level term assurance pays a fixed sum if you die within the term, and is the usual choice for replacing income and covering family costs. Decreasing term reduces its payout over time in line with a repayment mortgage, which makes it cheaper and is why it is often sold as mortgage protection. It is a poor fit for income replacement, where the need does not fall in step with a loan balance.

Whole of life cover has no end date and pays out whenever you die, which makes it substantially more expensive. It is generally suited to estate planning or funding an expected inheritance tax bill rather than to family protection.

Family income benefit is a less-known option that pays a regular monthly amount for the remainder of the term instead of a lump sum. For pure income replacement it is often cheaper than the equivalent lump sum and easier for a household to manage.

Two things worth doing when you take out a policy

Write the policy in trust. A policy held in trust pays out to the beneficiaries directly rather than forming part of your estate, so it normally sits outside inheritance tax and does not have to wait for probate. Probate can take months, which is precisely when a family needs the money. Most insurers provide trust forms at no cost, and this is the most commonly missed step in the whole process.

Answer the health and lifestyle questions completely and accurately. Non-disclosure is the main reason claims are disputed, and the saving from omitting something is worthless against the risk of the policy not paying when it is needed.

Review the figure after any major life event: a new mortgage, a new child, a change in your partner's income, or leaving a job that carried death in service cover. A sum assured set eight years ago is unlikely to still be the right one.

Worked example: a couple with two children and a mortgage

One earner on £32,000 net, replacing ten years of income, with a mortgage and modest existing cover. These are the exact figures this calculator returns.

Annual net income to replace£32,000.00
Years of income to replace10 years
Income replacement£320,000.00
Outstanding mortgage£180,000.00
Other debts£8,000.00
Funeral costs£4,000.00
Children's future costs (2 × £30,000)£60,000.00
Total need£572,000.00
Existing life cover£100,000.00
Savings and other assets£20,000.00
Recommended cover£452,000.00

The £100,000 of existing cover here is death in service through an employer, and it is doing about a fifth of the work. It is also the part that disappears on the day you change jobs, which is worth remembering before treating the remaining gap as settled.

Frequently asked questions

How much life insurance do I need?
Add up what your household would need: the income you would be replacing multiplied by the number of years it is needed, the outstanding mortgage, other debts, funeral costs and any future costs such as childcare or education. Then subtract existing cover, including death in service through work, and savings your family could draw on. The remainder is the sum assured to aim for. Multiples of salary are quick, but they ignore your mortgage, your partner's income and how many years of dependency are actually left.
Is ten times salary a good rule for life insurance?
It is a starting point, not an answer. Ten times salary can be far too much for someone with no mortgage and independent children, and well short for someone with a large mortgage, young children and a partner who would have to stop working. A needs-based calculation takes about two minutes and reflects your actual position, which is why advisers use it rather than a multiple.
Should I use gross or net income in the calculation?
Net. A life insurance payout is not subject to income tax, so what the household needs to replace is the money that actually reached the bank account each month, not the pre-tax salary. Using gross income systematically over-insures, which means paying a higher premium for cover the family does not need.
Does my employer's death in service cover count?
Yes, and it should be included as existing cover, but treat it as a supplement rather than a foundation. It is typically two to four times salary and it ends the day you leave that job, so anyone relying on it entirely can find themselves uninsured at exactly the point they change employer, which is often also when income and mortgage commitments are changing.
What is the difference between level and decreasing term life insurance?
Level term pays the same sum assured throughout the term. Decreasing term reduces its payout over time, usually tracking a repayment mortgage balance, which makes it cheaper and is why it is commonly sold as mortgage protection. Decreasing term suits a shrinking debt; it does not suit income replacement, where the need does not fall in line with a loan.
Should life insurance be written in trust?
In most cases yes, and it is the step most often missed. A policy written in trust pays the beneficiaries directly rather than forming part of your estate, so it normally falls outside inheritance tax and does not have to wait for probate, which can take months. Insurers provide the trust forms free of charge, so the main cost is remembering to do it.
How many years of income should I replace?
The two most common anchors are the years until your youngest child becomes financially independent and the years left on the mortgage. If your partner earns and would keep working, you may only need to cover the shortfall rather than your entire income. If they would have to stop or reduce hours to care for children, replace more than your own salary, because their lost earnings are part of the gap too.
Do I need life insurance if I have no children?
It depends on who would be affected financially. If you have a joint mortgage or other joint debt, the survivor inherits responsibility for it, so cover at least equal to that balance is usually sensible. If you have no dependants and no joint liabilities, life insurance may not be a priority at all, and income protection or critical illness cover is often the more relevant product.

Also known as: life insurance calculator · life insurance calculator UK · how much life insurance do I need · life cover calculator · life insurance cover calculator · life assurance calculator · mortgage life insurance calculator · life insurance premium calculator

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