🔢 What Is Life Cover?

Life insurance is a policy that pays out a tax-free lump sum to your loved ones if you die during the term of the policy.

It’s there to:

• Replace lost income
• Pay off the mortgage or rent
• Cover childcare and school costs
• Help with funeral expenses
• Give your family breathing space to adjust

📏 The “10x Your Salary” Rule,  And Why It’s Not Always Enough

You might’ve heard: “Just get 10 times your salary in life cover.” This is a simple shortcut. If you earn £40,000, the idea is to get £400,000 of cover.

✅ Pros:

• Easy to calculate
• Helps provide income replacement for 10 years

❌ Limitations:

• Doesn’t account for specific debts or childcare costs
• Doesn’t factor in existing savings or assets
• Assumes your income is what the family depends on
• May over- or under-insure you based on your age/life stage

🧮 A Better Way: The “Needs-Based” Method

Instead of just multiplying your income, build a list of actual needs:

Step 1: Immediate Expenses

• Funeral costs: £4,000–£8,000
• Legal and probate costs: £1,000+
• Any unpaid taxes or loans

Step 2: Debts and Mortgage

• Outstanding mortgage balance
• Credit cards, personal loans, car finance
• Any guarantor loans (they may pass to your estate)

Step 3: Ongoing Living Costs

• Rent or mortgage payments
• Utility bills, food, transport
• Childcare or school costs
• Holidays, clothes, hobbies

Multiply by the number of years your family would need support, e.g. until your youngest child turns 18.

Step 4: Future Plans

• University fees
• Wedding contributions
• Support for ageing parents

Step 5: Subtract Assets

• Savings
• Workplace death-in-service benefit
• Existing life insurance
• Inheritance already arranged

✍️ Real-Life Example

Case 1: Lucy, Age 34

• £160,000 mortgage
• 2 children aged 4 and 7
• Earns £38,000 per year
• Wants 15 years of income protection and to clear mortgage

Rough cover calculation:

• Mortgage: £160,000
• 15 years x £38,000 = £570,000
• Final expenses: £10,000
• Existing savings: £40,000

Total recommended cover = £700,000

Case 2: Joe, Age 51

• Mortgage almost paid off
• No dependents
• Wants funeral cover + £20k gift to niece

Rough cover calculation:

• Funeral: £6,000
• Gift: £20,000
• Mortgage: £10,000 remaining

Total cover = £36,000

💡 A small over-50s or whole-of-life policy may work better here.

🛠 Tools to Help You Calculate Cover

There are free calculators online that walk you through it:

• MoneyHelper Life Insurance Calculator
• Aviva Cover Calculator
• Legal & General Life Insurance Calculator

They’ll ask questions about:

• Your income and debts
• Dependents and lifestyle
• How long you want the cover to last

Takes about 5–10 minutes to get a personalised estimate.

📉 Can I Reduce My Life Cover Over Time?

Yes, and it might be a smart move.

You might want to decrease your cover if:

• Your mortgage balance goes down
• Your children grow up and become independent
• You’ve built more savings or pension pots
• You change careers or retire

📌 Tip: Decreasing term insurance is designed for this. It reduces the payout over time and is often used alongside a repayment mortgage.

✅ Some providers also let you adjust the amount mid-policy – ask about this when choosing a plan.

🔁 Can I Cancel or Switch?

You can cancel most term policies at any time, but:

• You’ll lose the cover
• You won’t get any money back

It’s better to adjust the policy rather than cancel altogether unless you’re replacing it with a better one.

🔄 Switching providers could save money if:

• Your health hasn’t changed
• You’re not too much older than when you took it out
• You need less cover now than before

💡 Always compare policies side-by-side before switching. Look at exclusions, payouts, and fees.

⚠️ Common Mistakes to Avoid

1. Getting too little cover – Leaving debts unpaid or family short
2. Getting too much cover – Paying for more than you need
3. Forgetting about inflation – £100,000 today isn’t worth the same in 20 years
4. Not reviewing regularly – Life changes; so should your cover
5. Assuming work cover is enough – Workplace policies often only offer 1–4x salary

✅ Quick Recap: How Much Do You Really Need?

What to Cover	Average Amount
Funeral & legal costs	£10,000
Mortgage	£150,000–£300,000
Income replacement (10 yrs)	£300,000–£600,000
Children’s education	£20,000–£50,000 per child
Savings/Work cover offset	Subtract this from total

Most UK families with young children need around £200,000–£500,000 in cover. But every case is unique – that’s why doing the maths matters.

👣 Next Steps

1. Use a calculator to estimate your needs
2. Decide how long you want the cover to last
3. Choose level or decreasing cover depending on your goals
4. Compare quotes, and speak to an FCA-authorised expert if unsure

weSearch-uCompare can connect you with regulated partners who will explain your options clearly, and help you find the best deal for your life stage and budget.