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Life insurance calculator – complete guide to ‘How much life cover do I need?’

If you’re thinking about taking out or reviewing your life cover then you’re naturally going to want to know ‘How much life insurance do I need?’. This is one of the most common questions that consumers ask about life insurance when they’re thinking about how much cover they need and cost.

We’ve created our very own iam|INSURED Life Insurance Calculator to give you some help and guidance for this critical element. In this section, our experts will also explain how to calculate the amount of life cover you might need to protect your family and several things to think about.

Most life insurance calculators will try to push you towards an ideal figure which is often ‘too high’ or ‘too expensive’. It’s difficult to give an exact figure that takes everything into account, such as your health and your budget.

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60-Second Summary – iam|INSURED Life Insurance Calculator

Our Life Insurance calculator shows you some of the things that you might want to think about and a guide for how much cover you might need to protect your family. There are lots of life insurance calculators and different ways to think about what amount of life insurance is best.

Ultimately, we’ll show you the things that you should think about and then explain why those things are important.

  • Life insurance calculators are designed to be a guide and to show you the how to protect your family and your home.
  • Most of the main life insurance calculators use a similar formula but there’s no specific rules, so results might be slightly different.
  • It’s definitely worth checking several different life insurance calculators and ideally you should get proper advice from a life insurance expert.
  • Life insurance calculators are only to be used as a guide and they don’t take in to account your health, financial circumstances and your budget.

Life insurance can be used for a wide range of purposes, but ultimately it is to protect your family or your financial dependents if you die. This means that the amount of cover you need depends on your attitude to risk and your own individual circumstances.

Our life insurance calculator is designed to give you a guide and suggest a figure for how much life cover you need. This figure will take in to account a number of key factors and combine them to display the amount of life insurance that might work for you.

iam|INSURED life insurance calculator

  • Mortgage: Outstanding balance (not just the original mortgage amount)
  • Children and financial dependents: How many children/dependents and their ages
  • Rent: How much rent do you pay on average per month (if you’re not a homeowner)?
  • Funeral expenses: Would you like to include funeral expenses or cover this separately?
  • Existing cover: Any existing policies that you will continue to pay and keep
  • Savings, property or investments: Do you have any other assets to include?

These are some of the main elements that might impact you when thinking about ‘How much life insurance do I need?’. Some other potential influences might include any inheritance or financial support from parents or other family members.

Note: There are loads of ‘life insurance calculators’ and most of them use a similar format to calculate the amount of life insurance that you need. You should be careful that you don’t use them as an exact science because nobody can really tell you what you need in a calculator for something as important as life insurance, nor can they say what you can afford.

Martin Lewis recommends that you start with a simple life insurance formula which is 10 x your annual salary. This is a very basic formula to calculate your life insurance needs, but it is quite useful to get you started with a basic figure.

There are lots of other things to consider if you wanted to be more detailed and more precise with your calculations. The best formula to calculate your life insurance in our opinion is to start with:

  • Mortgage balance OR Rent payments (up to a child’s 21st birthday)
  • Annual salary (Joint or Single) x 10 years
  • Legacy goals (desired amount to leave children)
  • Funeral expenses (unless covered separately)

There’s no specific formula to calculate life insurance, but there are potential rules that you can apply to help to guide you. Ultimately, it boils down to your own attitude to risk and most importantly, how much you can afford to spend.

It’s important to ask yourself ‘what would my family need if I die?’ which is a very difficult question for any parent. You should start with thinking about what it would mean for your household income and your outgoings if you weren’t around.

If you have younger children to protect then you might want to think about what they would need to get to a non-financially dependent age (e.g. 18 years to 25 years). You might also be taking out life insurance to protect a partner or for a financially dependent parent, so it can be different for certain people.

Ultimately, you should think about what you might want to leave to make sure that your family does not suffer financially in the event of your death. You should also include your budget or affordability in the calculation as not everyone can afford the ideal amount of life insurance.

A life insurance policy pays out a lump sum if you die during the term of the cover to support your family or any financial dependents you have. Life insurance can be used for many reasons and the most common types of life insurance policy are:

You could also choose to buy either single or joint life insurance based on your own personal circumstances and what feels right for your family. The main thing is to think about what life insurance will cover and how much peace of mind it can offer.

Each of these life insurance products pays out a lump sum or an income on death and each of them will cost a different amount based on how much cover they provide. You should make sure that your chosen policy is the right one for you and your family.

Life insurance is extremely flexible in this sense and can usually be cancelled at any point without a penalty or charge. You should always carefully consider your options when thinking about cancelling any life insurance policy because your cover will cease and your family will no longer be protected.

What are the top 5 reasons for cancelling life insurance?

  • Unaffordable (can no longer afford monthly premiums)
  • Separation (divorce or separation)
  • Decided against it (don’t think it’s important any more)
  • Alternative cover (switching to another insurance provider)
  • Change in circumstances (children left home or a new mortgage)

Based on our many years of experience in helping customers with their life cover, these are some of the top reasons for people cancelling their cover.

Note: If you are thinking about cancelling your life insurance then you should speak to your adviser or contact your insurance provider for guidance first. If there are any additional rules around cancelling your policy, they will be explained in your policy terms and conditions.

The average cost of life insurance also varies dramatically for each person and every policy because of the number of different elements involved. We’ve calculated that the average cost of life insurance in the UK is £38 per month for £152,000 of cover.

For a full breakdown you can visit our guide to the average cost of life insurance UK.

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Another very important factor when thinking about how much life insurance you need is how much life insurance can I afford. Everyone’s financial situation is different and it’s very easy to say how much life cover you should have, but can you afford that amount in the real world.

Ultimately, you want to get the right amount of life insurance to protect your children and your family but the cost needs to be affordable each month. Worst case scenario is that you take out too much cover that’s unaffordable and you need to cancel it in the future because it’s too expensive.

There are several main elements that are factored in to a standard calculation to generate your life insurance premiums, including:

Each person that applies for life insurance will have a different calculation based on their medical history and individual circumstances.

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We understand that there are lots of life insurance calculators to choose from on the internet and we appreciate that they can be confusing. There are a number of issues with several of the life insurance calculators that we’ve seen so here’s some of the reasons why.

  • Too complicated: We’ve seen that there are several life insurance calculators that are too complicated and confusing, so they don’t actually help you to understand how much life insurance you might need.
  • Too simple: Alternatively, some life insurance calculators are too simple and they can underestimate the amount of life cover you need without taking everything in to account.
  • Death-in-service: Several life insurance calculators include death-in-service policies in the calculations which should not be classed as part of your life insurance provisions. If you leave that job, are made redundant or your employer ceases this benefit, then this payment will be lost.
  • Short term debts: Some life insurance calculators also include short-term debts (e.g. credit cards, store cards etc.) which are not a true reflection of your long-term liability.
  • Dependents: We find it easier to allocate a lump sum per child that you can use for your calculation that gives you something to work with or towards.
  • Other assets or investments: Not many life insurance calculators include other property or investments that you might have that can provide financial security to your family.

Note: We’ve designed our iam|INSURED Life Insurance Calculator to provide you with a guide for the amount of cover you might need and show you the things that you should be thinking about.

Life Insurance provider reviews

Here are a few other life insurance calculators that we’ve looked at and they can be used to give you a quick guide.

Zurich Life Insurance calculator – CLICK HERE

HSBC Life Insurance calculator – CLICK HERE

Obviously, we think that our life insurance calculator is the best and we’ve spent a lot of time creating something that works based on our many years of experience. Our team of life insurance experts has over 25 years of knowledge and expertise to give you the best guidance to protect your family.

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What to do if you can’t find life insurance

There are certain options and support mechanisms that are available to you if you’re struggling to find life insurance. One of the bodies to support consumers with life insurance is the British Insurance Brokers Association (BIBA) which covers all insurance services in the United Kingdom.

BIBA provides a Find Insurance service that allows you to search for a recommended member who might be able to help you.

Telephone (Insurance Help)- 0370 950 1790

Telephone (General Enquiries) – 0344 7700 266

Emailenquiries@biba.org.uk

We’d always recommend that you get proper advice from a life insurance specialist or expert, unless you’re comfortable with how it all works. Most life insurance advice is free and you should end up with the right amount of life cover, plus they should help to save you money.

Our friendly team of life insurance experts is on hand to help to support and guide you to get the best cover, and to save you money.

For help or advice you can contact our team of life insurance specialists on 0800 009 6559 or CLICK HERE.

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Is it worth paying for life insurance?

Yes, if you’ve got children or financial dependents then you should have life insurance to protect them if you die. Martin Lewis and the Financial Conduct Authority recommend that you take out life insurance to protect your family and your home. Generally, life insurance premiums start from as little as £5 per month and will be cheaper for younger adults.

Common myths about life insurance:

  • Life insurance won’t pay out (pays out 98% of claims)
  • People with medical conditions can’t have life insurance
  • Life insurance is expensive
  • Savings can be just as effective as life insurance
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Is life insurance worth it? - iam|INSURED

What is the average cost of life insurance per month?

Based on recent research carried out, the average cost of life insurance is approximately £38 per month and the average level of cover is £152,000. Life insurance premiums also vary dramatically from one insurance provider to another and you can reduce your monthly premiums by shopping around.

Fundamentally, life insurance premiums vary depending on your age, health and the amount of cover that you need, starting from as little as £5 per month. You can also get life insurance to protect your family and your home against financial loss if you die.

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Average cost of life insurance - iam|INSURED

What does life insurance cover you for?

Life insurance is a monthly renewable ‘term insurance’ contract that pays out a cash lump sum or regular payments on death to your family or beneficiaries. Policies are most commonly used for family protection or mortgage protection for your loved ones if you die and your household income reduces, plus the additional issues of losing a parent or carer.

Traditional life insurance will not exclude any pre-existing medical conditions and will cover suicide after 12 or 24 months. You can also use life insurance for business protection purposes as well as tax-efficient business life insurance for directors or key people.

What are the disadvantages of life insurance?

The biggest and most common problem that consumers have with life insurance is the cost and the monthly premiums. This is the top reason for policy cancellations and why more people don’t take out life insurance to protect their family.

Another key disadvantage with life insurance is that it holds no investment value, nor can you cash it in. Life insurance works like any other traditional general insurance policy (e.g. car insurance, house insurance, pet insurance etc.), you pay a monthly premium and it will pay out in the event of a claim. Some people decide to use savings instead of taking out life insurance but you need to make sure that you have sufficient savings to cover the costs of death for your family.

Why do I need life insurance?

The fact is that nobody actually ‘needs’ life insurance, but it is strongly recommended that families and couples have cover to protect their loved ones in the event of death. Martin Lewis recommends life insurance and says “this is something that every parent, partner, or person with any other type of dependent needs to consider”.

Life insurance financially protects your loved ones if you die and pays out a cash lump sum to repay your mortgage, pay for school fees, replace lost income, and pay for regular outgoings. Mortgage life insurance is not linked to your mortgage debt so you can use it to pay off some or all of your mortgage.

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At iaminsured.co.uk, we believe in much more than just insurance policies; we believe that everyone is unique and should be treated with the fairness that they deserve. We also believe in providing the very best financial protection, and giving you peace of mind to continue with your busy life without the stress or worry of what might happen.

We are dedicated to providing the best outcomes that we can and access to the best insurance solutions in the way that our customers want or need. We understand that everyone is totally unique in how they want things done and their own individual circumstances, which is where our totally unique approach to financial protection is driven from.

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With nearly three decades of expertise and established with a commitment to excellence in everything that we do. We have been a trusted partner for thousands of families, individuals and businesses, all with one common goal of looking for the best protection solutions.

Our Mission: To provide easy access to fair pricing, affordable protection and the very best financial security to families and individuals. We are dedicated to offering comprehensive insurance solutions that safeguard the well-being of our policyholders. Guided by integrity, transparency, and a commitment to excellence, we strive to empower consumers and families to face the future with confidence. Our mission is not just about policies; it's about protecting dreams, ensuring legacies, and being a trusted partner on life's journey.

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