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How Much Life Insurance Do I Need In 2023

How much life insurance do I need?

It’s a common question: how much life insurance do I need if I’m single or part of a family unit?

According to industry experts, ten times your annual gross income is the ideal amount to start with for life insurance coverage. However, this could increase to ten or twenty times if you have significant outgoings or a big family.

Everyone with a family has the same worries. How will they be cared for if something happens to you or your wage-earning partner? The sad truth is too many don’t know.

Research figures published on just last year revealed…

“44% of those with children aged 18 or under, and/or married and in a long-term relationship, don’t have any life insurance, a figure which rises to 72% when considering those without critical illness cover.”

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Many People Still Remain Uninsured

The reality is that thousands of people are without any type of insurance, and some are underinsured too.

There may even be some who don’t have the right type of insurance. The main myth is that insurance isn’t affordable.

It is affordable, provided you research providers, shop around, and, most importantly, be realistic about your needs.

Have you got yourself life insurance for your day-to-day working life locally? How about when you decide to work overseas?

According to, three-quarters of adults with families have life insurance in the United Kingdom. Therefore, one in four people still don’t have life insurance in the U.K.

But it is not within the UK alone that this matters. UK expatriates working overseas are eligible and should have ex-pat life insurance cover.

If you are yet to join the life insurance bandwagon, your first question must be, “Where should I start?”

How Much Life Insurance Do I Need In The UK?

As this is an individual choice and a personal decision, it’s likely to depend on various factors, such as how much your dependents depend on your income versus how much insurance costs and the amount you can afford to spend each month.

However, Britons habitually underestimate the amount of life insurance they’ll need.

If you’re not sure about coverage, take a look at these aspects before making your final decision:

Covering Your Mortgage

If you’re looking for life insurance in the UK, it’s important to consider how your family would afford the mortgage repayments if you died.

This is why many homeowners choose to take out a mortgage life insurance policy, which pays out a lump sum large enough to clear the mortgage debt.

Mortgage life insurance policies typically run until the mortgage is paid off and can be either level term or decreasing term cover.

Most people with repayment mortgages go for decreasing life policies, which means the size of the pay-out decreases as your mortgage debt gets smaller over time.

If you currently have an interest-only mortgage and are only repaying the mortgage interest, not the capital debt, remember to include both capital and interest when working out how much cover you need.

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Covering family expenses

When it comes to life insurance, it’s important to think about more than just your debts. If something were to happen to you, your loved ones would need to be able to cover essential expenses like food and bills.

That’s why taking out a life insurance policy is a good idea, particularly if you are a Mum. A policy can provide your family with a financial cushion should you pass away, which can help them pay for things like childcare or education costs.

So if you’re considering taking out life insurance, weigh up all of your options and compare policies. That way, you can be sure you’re getting the best deal possible.

Replacing Your Income

It’s essential to consider how much money you’ll need to keep coming in each month. You want to ensure your policy covers your current and future expenses, but you don’t want to pay too much monthly premiums.

Try multiplying your salary by the years you need to keep earning – this will give you a good estimate of the payout you’ll need.

Critical Illness

Critical illness insurance is designed to provide you with a tax-free lump sum if you’re diagnosed with a serious illness during the policy term.

The lump sum can be used in any way you want, for example, to help pay mortgage repayments, replace lost income, pay for private treatment or make adaptations to your home.

You might think that your health is good and that you have a young family dependent on your income, so you don’t need this type of coverage. Unfortunately, no one knows what is around the corner, and critical illness can happen to anyone anytime.

According to the Association of British Insurers (ABI), one in three people in the UK will develop some form of cancer during their lifetime.

Moreover, the ABI says that around 150,000 people in the UK have a heart attack every year, and approximately four out of every ten men and six out of every ten women will die from coronary heart disease.

If you’re the primary breadwinner in your family, imagine how they would cope financially if you became seriously ill and couldn’t work. This is where critical illness cover could help.

Of course, no one likes to think about what might happen if they become seriously ill, but taking out critical illness cover gives you peace of mind that you and your family would be financially protected should the worst happen.

Many types of critical illness policies are available, and the level of coverage will vary from provider to provider. Shopping around and comparing policies is important to ensure you get the right cover for your needs.

Covering Funeral Costs

One of the main purposes of life insurance is to provide financial protection for your loved ones in the event of your death.

This can include covering the costs of your funeral. Funeral costs can be significant, and they can be a burden on your loved ones at an already difficult time.

Life insurance can help to ease this burden by providing the funds to pay for your funeral.

You can either factor the extra cost of a funeral into your life insurance policy, or you can opt for a specialist funeral plan.

A funeral plan is a way of arranging and paying for your funeral before you die so you know that your wishes are taken care of and your loved ones are not left with a large bill.

You can pay instalments or a lump sum to a funeral planner, which invests your money into an insurance policy or an independent trust fund.

Either way, life insurance can provide peace of mind by knowing that your funeral costs are covered.

What Are The Main Types Of Life Insurance?

There are two different types of life insurance you can get. Read on to discover which one is right for you and your situation.

Term Life Insurance

One of the different types of life insurance you can choose is term life insurance. This is considered one of the most basic forms of insurance. It offers death benefit protection but no building up of cash value within it.

This may be the best coverage you can apply for if you are a young person in good health with a family to look after.

For How Long Does It Cover You?

This is coverage that can be bought for a particular length of time. Typical term life insurance packages tend to come in increments of five years. They start at ten years and can get as high as 30 or even longer.

Some suitable insurance carriers will also offer a one-year renewable term.

Pros and Cons

So, what are the advantages and disadvantages of taking such cover?

Term life insurance is one of the best-known types of life insurance policy and one of the most affordable. You’d be hard-pressed to find a single financial planner who would recommend other types of life insurance, especially for young ex-pats.

Of course, this is very generalised, and you need to consider your situation and needs before choosing a life insurance plan that suits you.

If you have term life insurance, particularly a level term life insurance policy, the premium you must pay through the policy period stays the same. There’s no need to worry about increased costs or nasty surprises.

One of the biggest problems with this type of life insurance policy is that it renews at an increased premium.

This means that if you get this insurance for five years and then get it for another five years, the amount you have to pay for it goes up.

In some cases,  it can rise by as much as 200 percent. However, this isn’t always the case. Some only increase by a tiny amount, whereas others may keep the premium the same but decrease the face amount.

Examples of Term Life Insurance

Term life insurance comes in various types. We have listed them below.

  • Decreasing Term life insurance: This keeps your policy premium the same throughout its lifetime. However, the death benefit goes down over the period you have it.
  • Level Term Life Insurance: If the idea of losing death benefits doesn’t appeal, you can always get level-term life insurance. This type of insurance policy offers fixed premiums and fixed death benefits for the length of your coverage.

Whole Of Life Insurance

3 Key Questions to Consider about Life Insurance

Do you really need it?

Do I need life insurance has to be the most popular question asked. The simplest way to answer this is to consider who relies on you getting paid.

Do you have children, dependent relatives, or a partner reliant on your income to pay the mortgage?

You need life insurance if your earnings support other people’s living costs. If you get your wages paid and are free to splash every last penny of it any way you please without affecting anyone, you won’t need the cover.

Chances are, though, someone in your life would need financial support if you weren’t around, even if that’s a distant relative who shows up at your door only when he or she needs something.

And also, think about this… It’s not just for homeowners to make sure the mortgage gets paid.

People who rent also need it to make sure the rent gets paid. You don’t need to own your home to insure your family.

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How much should the policy cover?

The policy’s value should at least cover what’s left to be paid on the mortgage. If there’s no mortgage, the minimum should clear the debts.

Things to consider are:

  • Outstanding debts include the family car and any household items bought on credit.
  • Dependent parents may need care costs, such as ongoing live-in support, rentals for a retirement home or a part-time carer.
  • The ongoing care costs for children and their living costs.
  • Not to mention the rising cost of living.

The reality is that even with life insurance in place, money only goes so far.

You can’t protect against everything, but you can think about where the money would need to be spent to determine how much coverage you need.

What type of cover should I get?

As we mentioned earlier, there are primarily only two common life insurance products, whole of life and term life.

If it’s affordability you’re after, term cover is suited to more affordable life insurance quotes. Whole of life cover is pricier because it lasts until you die.

With term life cover, the idea is to have the policy cover your major debts.

There is also decreasing term cover, which is more suited when your most pressing concern for insurance is to make sure the mortgage is paid while getting the most affordable insurance premium.

With a decreasing term policy, the monthly premiums and the payout decrease over the term of the policy.

Those are just for life insurance. It’s also smart to consider the family background of critical health conditions and other life-threatening conditions.

Suppose there’s a history of cancer, heart conditions, or brain disorders, which would increase your care costs while decreasing your income due to being unable to work. In that case, life insurance doesn’t help you as that’s only payable upon the policyholder’s death.

Critical illness cover is available to insure against yourself becoming ill, and if you’re more concerned about lost earnings, then income protection could be more suitable.

The Average Cost Of Life Insurance?

The UK’s average cost of life insurance depends on various factors, including age, sex, and health history. However, as a general guide, you can expect to pay around £10-15 per month for life insurance cover.

It’s important to shop around to find the best deal on life insurance, as premiums can vary significantly from one provider to another.

And it’s crucial to inform your family after you get one so they don’t have to struggle with a lost and unclaimed insurance policy when you pass away.

You can use a comparison website such as Insurance Hero to find the cheapest life insurance policies available in the UK. You might also want to read our detailed guide, which many have found helpful.

How Much Life Insurance Do I Need Conclusion

Before you start work in the United Kingdom or travel overseas, you need to choose the right type of life insurance that suits you.

Whether you go with term life insurance or whole of life insurance, you must ensure that you get insurance from a reliable team of experts.

For more information on how we can help you, click here!

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