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How much Life Insurance do I need?

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Mika, Staff Writer

Friday, 4th June 2021

Life Insurance

How much Life Insurance do I need?

When taking out a life insurance policy, your provider is going to want to ask you how much cover you’d like. The amount you choose will affect the cost of your premiums and of course, how much your family would receive if you die, or when you die if opting for whole life insurance.

The figure you state needs to match your personal circumstances. To understand what these are, you need to consider what your current expenditure is, along with any future financial plans that you may want to pay for on your children’s behalf. 

We know the topic of life insurance can seem overwhelming, which is why we’ve broken it down into the following essentials to make it as straightforward as possible. 

How much Life Insurance do I need for a mortgage?

Life Insurance

Buying a house is the most expensive purchase most people will ever make in their life. Typically, mortgages are paid over 25 years. Therefore, when it comes to your life insurance, you need to consider what would happen to your family if you died before your mortgage was paid off in full. 

This type of life insurance is known as mortgage insurance or mortgage only life insurance. As the name suggests, it will pay off your mortgage for you if you die within the time you hold the policy. So the question is, how much should you set aside? 

It’s unlikely you will need insurance for the full amount unless you take your life insurance policy out at the same time as securing your mortgage. Your premiums may also be adjusted periodically since the amount needed to pay off your mortgage will decrease over time. If you're ready to apply for a mortgage but need a little guidance, it's always a good idea to hire a mortgage advisor to help you through the process.

Final expenses insurance

When thinking about how much life insurance you need, you need to factor in whether you want the insurance to cover final expenses. The average cost of a funeral is £4,000 in the UK. Unfortunately, if money is not put aside to pay for your funeral in advance, then your family will have to pay for this cost. On top of grieving, the financial implications can add even more emotional strain for your loved ones. Therefore, your life insurance can also cover any final expenses you may have.

Aside from your funeral costs, consider any costs associated with legal fees. This can be related to sorting out your estate, dealing with any business affairs or even settling any debts. All of which will sadly fall to your family unless you get your finances in order before you die. 

You will need to calculate any end of life costs (you may want to seek advice from a financial advisor to do so) and add these to your coverage amount. 

How much Life Insurance do I need for my child?

Life Insurance

The cost of raising a child to the age of 18 if you are a single parent is £151,000 in the UK.

Some people choose to insure their family for immediate expenses such as housing, bills, food, clothing etc. Others want to be able to provide for their child over their lifespan, potentially extending into leaving money for grandchildren too. 

When calculating how much life insurance you need to be able to provide for your children, some of the top expenses to consider include: 

  • Education

  • Everyday living expenses

  • Future grandchildren

  • House deposit

  • Savings

  • Wedding

Both whole of life and term life insurance can offer cover for your children. The difference is that whole of life will payout when you die regardless of when that is. Term life insurance will only payout if you die within a specific time frame, which could be until your children turn 18 as an example. 

Life insurance policies are flexible so that you can leave as little or as much as your children will need. You may also find paying into a whole life insurance policy will reduce inheritance tax implications. 

What other types of insurance are there?

Life Insurance

There are many ways you can protect your family, home and assets with insurance. When taking out a life insurance policy, you may want to review existing policies you have to ensure your life insurance covers you for everything you need. 

Life Insurance experts near me

We understand trying to sort out life insurance can feel daunting, not to mention confusing. If you require further advice about how much life insurance you need, then Bark has life insurance experts near you who are ready and waiting to help you. 

Simply tell us where you are based and what type of insurance you are looking to take out. From there, we'll connect you with an expert to help you find the right policy for your needs, and advise on how much cover is appropriate. Sorting out your life insurance is as easy as that!

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