Life insurance is a way to provide for your family once you’re gone. It’s a difficult thing to think about, because no-one wants to spend their time imagining how or when their life might end and the financial repercussions this would have on their loved ones.
How much life insurance cover you would need to protect your family can be a difficult question to answer. Our calculator can help you work out how much your family would need if the worst should happen.
If you have a mortgage, life insurance can be used to pay off the remaining balance when you pass away, meaning your loved ones won’t need to worry about making mortgage payments and can stay in your family home.
When thinking about life insurance, something to consider is the outstanding amount on your mortgage and factoring this into the total amount of cover you may need. We will include this figure in your calculation, just let us know how much you have outstanding.
The type of mortgage you have can affect the type of Life Insurance you may want to take out. Click on the mortgage types below to learn more.
If you have a capital & interest mortgage then you may want to consider taking out decreasing life insurance. This means that the amount of cover decreases over the duration of the policy, normally in line with the balance on your mortgage.
These policies typically cost less than a level-term policy for the same amount of cover.
If you wish to leave a lump sum as well as clearing your mortgage, then you may want to consider taking out level-term insurance or separate policies for your mortgage and lump sum cover.
If you have an interest only mortgage then the amount of capital you owe does not decrease as you make your mortgage repayments.
You may therefore want to consider taking out a level-term life insurance policy. This means the amount of cover you have remains the same over the duration of your policy and you would still leave enough money to clear your mortgage balance.
It’s not a problem if you don't have a mortgage, it won’t stop you getting life insurance. It just means we don't have to factor this in to your calculation. Let’s move on to the next section.
It is important to know how any debts you have are cleared when you die. By understanding this you can make sure that you have an adequate level of cover in place.
When you die your debts will be paid off using the value of the estate in order of importance. This means that secured debt such as your mortgage will be paid off first. Then your funeral costs and fees will be paid. Finally your unsecured debt including loans, credit cards and hire purchase agreements will be settled.
The money to clear your debt comes from your estate before anything can be distributed to your loved ones, so if you have debts then you may not be leaving them as much money as you'd hoped.
Because of this, it is important to factor in debt when calculating how much cover you need.
Talking about your funeral plans with family members can be a huge help if you were to die - it means that they don't have to guess as to what your wishes would have been. It's a difficult subject, but it's best to get it done and out of the way as soon as possible.
As well as the logistical side of planning a funeral there are also financial implications, too. You don't want your family to be under even more stress during this very difficult period, so including funeral costs in your life insurance can help you make sure this doesn't happen.
The average cost for a funeral in the UK in 2018 was £4,271 (Sunlife.co.uk). But did you know the 'Cost of Dying' was actually £9,204 (Cost of Dying Report 2018). This takes into account all sorts of costs; transportation, catering, flowers, venue etc.
Hopefully you can see the importance of easing the pressure on your family and making sure they are not stressing over finding somewhere in the region of £5,000 at an already very difficult time.
A lump sum payout is exactly that; if you should pass away you will leave a lump sum of money which can be paid in one go or spread out over a set period. We have already looked at clearing your mortgage, debts and covering your funeral costs but it is important to factor in living costs for the loved ones you leave behind.
If you pass away, would your family be able to afford the every day and not-so-every-day costs? Simple things such as the weekly or monthly food shop, bills, maintaining a car or even school uniform can quickly add up. You may also want your family to still be able to enjoy a holiday or think about education and university fees.
The lump sum amount is a difficult question to answer, a good place to start might be to multiply your annual salary by the number of years you wish to cover your family for and go from there (you can use our handy calculator below to help!).
One question we hear a lot at Protect Line is 'Why should I spend the money on life insurance and not just put money away in savings?' The answer is simple; with life insurance you are covered from the moment you take out your policy, whereas it may take many years to save the same amount yourself.
That said, if you already have some savings that would be left to your loved ones should you pass away, then you may want to take those savings into account when working out how much cover you actually need. You may also have an existing life insurance policy, if so we can factor that in, too.
We want to make sure your new policy covers exactly what you need, making sure your payments are affordable but at the same time providing maximum protection for those you leave behind.
Debt to be settled:
Funeral costs covered:
Lump sum payout:
Existing cover & savings:
Based on the calculations, it looks like you need some life insurance to cover some of the costs you've stipulated and protect your family.
Fortunately, that's what we're good at! Now you know how much cover you need we can provide you with quotes for an adequate level of protection.
Lucky for some, eh? You have enough in savings and other protection policies that you don't require an additional policy to cover any of the essential costs you've stipulated. However, if you still want to proceed with getting an additional policy, we can certainly help! Use our Quote Tool to find quotes for you, and we'll be in touch to get another policy arranged.