How much spending money to take on holiday
A daily budget per person, a seven-night example, the costs people forget and paying abroad without the fees.
Life insurance pays out if you die while the policy is running. How much cover you need depends on what your family would have to pay without you, and how long they would need your income. Here is how to add it up.
A simple way to size it: debts to clear, plus income to replace for a number of years, plus other costs, less the savings and cover you already have. In our example that comes to about £620,000.
Adding up what is needed
| Item | Example |
|---|---|
| Mortgage to clear | £180,000 |
| Other debts | £5,000 |
| Income to replace, £25,000 a year for 18 years | £450,000 |
| Funeral and other costs | £5,000 |
| Less savings | − £20,000 |
| Cover needed | £620,000 |
The income figure is what your family would need from you each year, which is often less than your full salary. The number of years is usually until your youngest child turns 18 or leaves education. Change it and the answer moves a lot: in the same example, 10 years of income needs about £420,000 of cover, and 25 years about £795,000.
For the funeral, SunLife's Cost of Dying Report 2026 puts the average simple attended funeral at £3,828 and a traditional funeral at £4,510.
Take off what you already have
Savings and investments would already be there, so they reduce the cover you need. So does existing life cover, including death in service benefit from your employer. Most employers who offer it pay between two and four times salary, but it usually stops when you leave the job, so it is risky to rely on it alone.
The main types of cover
- Level term. Pays a fixed lump sum if you die within the term. Good for income and interest-only debts.
- Decreasing term. The payout falls over the term, usually in line with a repayment mortgage. It costs less than level cover.
- Family income benefit. Pays a regular monthly income to your family until the end of the term, rather than one lump sum.
- Whole of life. Pays out whenever you die, as long as you keep paying the premiums. It costs much more.
Many people combine them, for example decreasing cover for the mortgage and family income benefit for living costs.
Write it in trust
A policy written in trust pays out to the people you choose without waiting for probate, and the payout is normally outside your estate for inheritance tax. Insurers usually provide the trust forms free when you take out the policy.
Work out your own figure
The life insurance calculator adds up your debts, income and costs, takes off what you already have and gives a figure to use when comparing quotes. If you are more worried about being off work through illness, the income protection calculator covers that side.
Sources: MoneyHelper, What is life insurance?; ABI, Family income benefit; Which?, Types of life insurance policy; Legal & General, Death in service benefit vs life insurance; SunLife, Cost of Dying Report 2026. This is not advice on a particular policy. Checked 1 November 2026.
This is general information, not financial or tax advice.
It explains published rules and figures. Your own position depends on your full circumstances,
so speak to a qualified adviser before acting on it.