How much life insurance do you actually need?

Why the income multiple is a starting point, not an answer

Ten times your income is easy to remember, which is most of why it persists. It is a reasonable opening guess for somebody with a mortgage, young children and no other cover. It is badly wrong for a renter with no dependants, and badly short for somebody with fifteen years left on a mortgage and a partner who does not work.

The multiple ignores the two facts that matter most: what would still have to be paid, and for how long somebody would need replacing income. Two people earning identically can need very different amounts.

Work from obligations instead

Add up what would not go away. The outstanding mortgage. Other debts that would pass to your estate. The cost of raising the children who depend on you, through to the age you expect them to be independent. Any final expenses you would rather your family did not meet from savings.

Then add the income your household would lose. Not your whole salary forever, but the years during which its absence would change how your family lives — commonly until a partner is re-established, or until the youngest child finishes education.

Then subtract what already exists. Employer cover, existing policies, and liquid savings all count. Employer cover is worth checking carefully: it usually ends when the job does, which makes it a supplement rather than a foundation.

The number is a decision, not a calculation

The arithmetic gives a range. What it cannot tell you is how much of that range fits a budget you will still be paying in ten years, which matters more than precision — a policy that lapses because it was uncomfortable protects nobody.

It is usually better to hold adequate cover you can sustain than ideal cover you cannot. Cover can be added later; a lapsed policy taken out when you were younger and healthier cannot be recovered on the same terms.

Where this can go wrong

The most common error is insuring only the earner. A partner who does not work still provides childcare and household labour that would have to be paid for, and the cost of replacing it is real — often larger than people expect once it is priced rather than assumed.

The second is treating the figure as permanent. A mortgage shrinks, children grow up, and income changes. A number that was right at thirty is usually wrong at forty-five — in either direction, and the direction is not always down.

The third is quietly assuming a partner would carry on earning exactly as before. In practice, bereavement and sudden sole responsibility for children frequently reduce someone's hours for a year or more, at the same moment the household loses an income. Cover that assumes an immediate return to normal is cover built on an optimistic year.

When to look at the number again

The figure is worth revisiting whenever the obligations behind it move: a house, a child, a marriage or divorce, a business, a significant change in income, or a mortgage nearing its end.

Reviewing does not mean buying more. Quite often it means recognising that the need has shrunk — the mortgage is smaller, the children are nearly independent — and that some of the cover has done its job. Knowing that is worth as much as knowing you are short.