How much life insurance do I need?

Taking on this week's burning question is Paul Chohan, Confused.com's head of mortgages and life insurance...

QUESTION: How much life Insurance do I need?

ANSWER: The answer will vary from person to person but the first priority is that your mortgage is covered and if possible any other debts in the event of death. 

One common mistake people make is to forget to make a provision in their sum assured to cover debts other than their mortgage, so be sure to take into account any overdrafts, loans, credit cards and hire purchase debts you have.

Other living costs such as food, utilities and council tax will still need to be paid and if you have a partner it is worth making sure you have enough life cover so they can take a break from work. This is even more important if you have children of pre-school age.

If you have dependent children it is also worth remembering that state benefits won’t provide anything like a luxurious lifestyle and you should make provision for your family so they can enjoy as good a standard of living as they do currently. 

Remember, your income does more than just pay obvious living expenses so you should ensure there is a surplus that will provide a lump sum for university study or to purchase a first car for example. 

A good place to start would be to take your annual income and multiply it by the number of years you will have a child dependent on you. 

Finally, it would also be worth increasing the sum assured by about an extra 5 per cent a year to take into account the effects of inflation. The easiest way to do this is by choosing a policy that has a sum assured that increases automatically each year.

If you have a question you'd like to put to the Confused.com team, e-mail editor@confused.com and we will do our best to provide an answer. Please note we will feature a question that is also likely to help other confused readers and if you want to offer your own opinion on the topic, post a comment below.

Comments

[Geoff]

That was useful information

Cheers Geoff

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