There is a quick answer and a proper answer. The quick answer is the old rule of thumb: around 10 times your annual salary. The proper answer adds up what your family would actually have to pay for if your income stopped, then takes off what they would already have. For most people with a mortgage and children, the proper answer is a good deal higher than the rule of thumb suggests.
This guide covers both, works through a full example, and shows how workplace cover and savings pull the number down.
Not financial advice. Everyone's circumstances differ. For a recommendation tailored to you, speak to a regulated protection adviser. Sources: Association of British Insurers (ABI) protection claims data, published July 2025; SunLife Cost of Dying Report 2026; GOV.UK Insurance Premium Tax guidance. Figures are UK-wide and current for 2026.
Life cover does its job when it is needed. The ABI reported that insurers paid a record £8 billion in protection claims across a single year, covering around 275,000 individual claims, with the average individual claim worth about £18,700. The point of the sum below is to make sure that payout is the right size for your family.
The quick rule of thumb: is 10x salary enough?
The best-known shortcut is 10 times your gross annual salary. On a £40,000 income, that points to £400,000 of cover. Some advisers stretch the multiple to 10 to 15 times.
It is popular because it is simple, and it is a reasonable opening figure. The weakness is that it ignores your actual liabilities. It takes no account of a £250,000 mortgage, or three young children, or the £30,000 of savings you already hold. Used on its own, the 10x rule commonly undershoots a family's real need by a six-figure sum. Treat it as a sanity check, not the final answer.
How to calculate your exact cover: the needs-based method
The accurate way is to add up everything your family would need to settle or replace, then subtract what they would already receive. Here is the full shape of it:
Cover needed =
Outstanding mortgage
+ Other debts (loans, cards, car finance)
+ Income replacement (annual income x years of support)
+ Children's childcare and education costs
+ Funeral costs
- Existing life cover
- Workplace death-in-service cover
- Accessible savings and investments
A worked example
Take a couple with two young children, one main earner on £40,000:
| Component | Amount |
|---|---|
| Outstanding mortgage | £180,000 |
| Other debts | £10,000 |
| Income replacement (£35,000 net x 10 years) | £350,000 |
| Childcare and education | £50,000 |
| Funeral costs | £5,000 |
| Subtotal needed | £595,000 |
| Less death-in-service (3x £40,000 salary) | (£120,000) |
| Less savings | (£20,000) |
| Cover to arrange | £455,000 |
Notice how far that sits above the 10x rule's £400,000, even after knocking off £140,000 of existing provision. The mortgage and the years of income replacement do most of the heavy lifting.
Free calculator
Life Insurance Needs Calculator
Enter your mortgage, debts, income and family details to get a needs-based cover figure in seconds, with the workplace cover and savings already netted off.
What the DIME method gives you
DIME is a tidy version of the same idea, easy to do on the back of an envelope. It stands for Debt, Income, Mortgage, Education:
| Letter | What to add |
|---|---|
| Debt | All non-mortgage debt (cards, loans, car finance) |
| Income | Annual income multiplied by the years of support your family needs |
| Mortgage | The outstanding mortgage balance |
| Education | Future childcare and education costs per child |
Add the four together for your cover estimate. DIME skips the step of subtracting existing cover and savings, so it tends to run a little high, which is no bad thing as a safety margin.
How much does the funeral cost?
Funeral costs are a small line next to a mortgage, but they are real and they land immediately. According to the SunLife Cost of Dying Report 2026, a basic attended funeral averages £3,828, and once you add the send-off (flowers, catering, the wake) the typical total reaches about £5,140. Costs run highest in London and lowest in Northern Ireland. A round £5,000 is a sensible default in your sum.
How much does workplace cover reduce the figure?
Many employers provide death-in-service cover, a lump sum paid if you die while employed. It is usually worth 2 to 4 times your basic salary, with 3 times the most common figure, and it is normally paid tax-free through a trust.
It is a genuine offset, so subtract it from your need. But treat it as conditional, not permanent: it is tied to the job and vanishes the day you leave or retire. If you are relying on it, keep a little headroom, or top up with a personal policy that stays with you whatever happens to your employment.
How long should the term be?
Match the term to the longer of these two:
- The years until your youngest child is financially independent, usually 18, or 21 if university is likely
- The years left on your mortgage
Then round up to the nearest five years. The one rule to hold onto: do not set the term shorter than your remaining mortgage, or you risk the cover ending while the debt is still there.
A tax point worth knowing
Life insurance is exempt from Insurance Premium Tax, the tax that adds 12% to most car, home and pet policies. The payout is normally tax-free, and if you write the policy in trust it usually falls outside your estate for inheritance tax and pays out faster. Writing a policy in trust costs nothing and most insurers arrange it for you.
Also consider
Income Protection Calculator
Life cover pays out if you die. Income protection replaces your earnings if illness or injury stops you working. See what monthly benefit you would need.