To find out what cover is right for your family and how much you need, start by looking at your basic monthly outgoings (rent or mortgage, bills, other debt repayments), and consider how much you and your partner contribute to paying these outgoings. That way, you can work out how much each of you would need were the other one to pass away.
You might want to factor in the rising cost of living when you’re deciding on cover limits. It is easy to forget that inflation typically makes most household bills more expensive over time, and you are likely to want a policy that keeps up. For example, a loaf of bread that cost 4p in 1960s’ Britain costs £1.04 today, showing that shopping bills are far higher.
Alternatively, you may want to choose a policy with an “increasing cover option”, so the lump sum paid out increases each year in line with inflation or by a fixed amount, such as three per cent.
When you are thinking about how your family would cope financially in the event of your death, it is worth taking into account other payments, besides a sum from an insurance policy, that would contribute to their financial stability. These may include any life cover you have through your employer and any investments, savings or pensions that would pass to your family when you die. There are also some state benefits that your family may be entitled to if a spouse or partner dies.
More articles you might like
Cancelling a Life Insurance policy
If you’re thinking about cancelling your life insurance policy these are the questions you’ll need to think about answering
What is life insurance?
Life insurance might sound confusing, but it is actually very simple. Here’s a guide to the different types on offer
What is a good death?
We asked a Bafta winner, an artist and a funeral director what having a good death means to them