The amount of life insurance cover you need depends on your personal circumstances for e.g. your financial obligations, dependents, income, preference, etc. Life insurance is tailor made to each person’s individual circumstances and requirements. You don’t need the same life insurance as I do, or the same as what your neighbour’s got and that’s why there’s no set rule or guideline on how much cover you should have. Most of it boils down to your affordability in the end. 

So for e.g. if you have a mortgage of 200k and you’re married with 2 kids. You’re the only bread winner in the family and you want to ensure that not only the mortgage gets paid off when you die but also there’s enough for your family to help them carry on living the same lifestyle, you could possibly go for a mortgage cover plus a separate policy to leave a lump sum behind for your family to help support them until the youngest child gets to a certain age. You could also go with just one life insurance with a big lump sum so when you pass away your family gets the whole amount and there’s only 1 claim rather than 2 separate claims which obviously is more of a hassle i.e. claiming 2 instead of 1. 

Now your situation won’t be any different even if your wife was also contributing towards the household income but if you had 2 young kids that needs looking after. Let me explain, should the worst happen tomorrow and your wife is left with the responsibility of looking after the kids all by herself, she would most probably need to leave her job to take care of the kids whilst they’re still young. So you would still perhaps need the same amount of cover to help your family financially.

A lot of advisers also advice cover amount equivalent to your remaining years of work to help replace your annual salary for those many years. To understand this with an example, let’s say you’re 47 now, working full time and earning about 40k annually and you’re planning to retire when you turn 67. So should the worst happen tomorrow, your family could potentially lose between 800k – 900k worth of your income (assuming your income could increase in future), based on 20 years of your working life. 

So different advisers would look at it differently as they all have their own biases towards how much cover they feel one should have. In the end, what matters is your personal outlook and affordability.

Sometimes, it’s not so much the amount of cover that matters but whether it achieves the financial protection you intended. For e.g. the length of time or the term on the policy plays a very important role when setting up a policy because eventually your family life insurance will only ever pay out if you die during the term. So if a million pounds worth of life insurance only covers you for 2 years, it is by no means better than a £100k worth of insurance that offers you coverage till age 85 even though they’re both the same price.             

That’s why it’s important to speak to a qualified adviser to ensure you have the right level of life insurance protection.