Life Insurance Needs Calculator

A common rule of thumb is 10-15 times your annual income, but individual needs vary significantly. A thorough calculation should include: income replacement for dependants, mortgage payoff, other debts, children's education costs, funeral expenses, and an emergency fund. Subtract existing savings and any employer-provided death-in-service benefit.

Level term pays a fixed lump sum throughout the policy term, ideal for income replacement. Decreasing term pays less over time as the sum assured reduces, designed to match a repaying mortgage balance. Decreasing term is cheaper because the insurer's liability reduces each year. Many financial advisers recommend having both types.

Life insurance payouts are generally free of income tax. However, the payout may be subject to Inheritance Tax (IHT) if it pushes the estate above the £325,000 threshold. Writing the policy in trust avoids IHT as the payout goes directly to beneficiaries without forming part of the estate. Writing in trust is free and highly recommended.

Yes. Writing your policy in trust means the payout goes directly to your nominated beneficiaries without forming part of your estate. This avoids Inheritance Tax, speeds up the payout (no need to wait for probate), and gives you control over who receives the money. Most insurers provide trust forms free of charge.

Many employers offer death-in-service benefit (sometimes called group life insurance), typically paying 2-4 times your annual salary. While this is a valuable benefit, it only lasts while you work for that employer. Relying solely on death-in-service cover is risky as it disappears if you change jobs or are made redundant.

If nobody depends on your income, you may need less cover. However, consider: any shared debts (joint mortgage), funeral costs, leaving an inheritance, and future changes (getting married, having children). A small policy taken out young is very cheap and locks in low premiums before any health issues develop.