Reviewed by Mustafa Bilgic
Founder, WebCalculator
Cover amounts are based on a needs-analysis approach. Premium estimates are illustrative. Not financial advice — consider speaking to a regulated financial adviser.
This life insurance calculator estimates how much cover you need to protect your family. It adds up your outstanding mortgage, other debts, income replacement for a chosen number of years, and any additional costs — then subtracts existing cover like death-in-service benefits to give you a recommended total.
Mortgage + income + debts − existing
The right amount of life insurance replaces the financial contribution you make to your household. The needs-based approach adds up four components: mortgage payoff so the family keeps the home; debt clearance for loans and credit cards; income replacement for the years until your partner can fully support themselves; and specific costs like childcare, school fees or university.
From this total, subtract any existing cover — employer death-in-service benefits (typically 2-4x salary), existing personal policies, and savings earmarked for this purpose. The gap is the additional cover you need to arrange.
Level term: Pays a fixed lump sum if you die within the term. Best for income replacement and general family protection. The payout stays the same whether you die in year 1 or year 20.
Decreasing term: The payout reduces over time, roughly matching a repayment mortgage balance. Significantly cheaper than level term and ideal for mortgage protection.
Whole of life: Covers you for your entire lifetime with a guaranteed payout. Much more expensive than term cover and mainly used for IHT planning or funeral costs.
Critical illness cover: Often added to a life insurance policy, this pays a lump sum if you are diagnosed with a specified serious illness such as cancer, heart attack or stroke. It is not the same as life insurance — it pays while you are alive. Premiums are significantly higher than pure life cover but it protects against the financial impact of a long illness.
Family income benefit: Pays a regular monthly income to your family instead of a lump sum. This can be more practical than giving a large lump sum to a grieving partner who may not be experienced in managing investments.
If a life insurance policy is not written in trust, the payout forms part of your estate and could be subject to inheritance tax at 40% above the nil-rate band. Writing the policy in trust means the payout goes directly to your nominated beneficiaries, bypasses probate, and is outside your estate for IHT. Most insurers provide a simple trust form at no extra cost.
Premiums depend on your age, health, smoker status, occupation and the amount of cover. As a rough guide, a non-smoking 35-year-old male can get £250,000 of level term cover over 25 years for approximately £10-£15 per month. Premiums increase with age and any health conditions. Because rates vary between insurers, always compare quotes from multiple providers.
Couples often choose a joint life insurance policy, which covers both partners and pays out on the first death. Joint policies are cheaper than two separate policies, but they only pay out once — the surviving partner is then left without cover. Two single policies cost more but provide a payout on both deaths, which gives better protection if both parents are working and contributing financially. For most families with children, two separate policies offer more comprehensive protection.
Use the mortgage calculator to see your outstanding mortgage balance over time. The inheritance tax calculator shows whether your estate exceeds the NRB, and the take-home pay calculator helps quantify the income your family would lose.
A common rule of thumb is 10 to 15 times your annual salary, but a more precise approach adds up your outstanding mortgage, other debts, years of income your family would need to replace, and specific costs like childcare or university fees. Subtract any existing cover such as death-in-service benefits from your employer.
Death in service is a benefit provided by many employers that pays a lump sum, typically 2 to 4 times your salary, to your beneficiaries if you die while employed. It is effectively free life insurance through your job and should be subtracted from your total cover need. Check your employment contract or HR department for your multiple.
Life insurance payouts are generally not subject to Income Tax or Capital Gains Tax. However, if the payout forms part of your estate, it could be subject to Inheritance Tax at 40% above the nil-rate band. Writing your policy in trust removes it from your estate entirely and is strongly recommended.
Level term cover pays the same amount throughout the policy. Decreasing term cover reduces over time, roughly matching a repayment mortgage balance. Decreasing cover is cheaper because the insurer's liability falls each year. Use level term for income replacement and decreasing term for mortgage cover.
The term should cover the period your family would be financially vulnerable without you. For mortgage protection, match it to your mortgage term. For income replacement, consider until your youngest child finishes education or your partner reaches retirement age. A 20-25 year term is common for families with young children.
If nobody depends on your income, life insurance is less critical. You may still want enough to cover funeral costs, outstanding debts, and any financial obligations you have such as a joint mortgage. Once you have dependants, reassess immediately.
Yes, but premiums will be higher depending on the condition. Common conditions like diabetes, high blood pressure or asthma usually result in a loading rather than a decline. Specialist brokers can search the whole market for you. Always disclose conditions fully — non-disclosure can void your policy.