UK life insurance cover guidelines
In the UK, life cover is commonly structured as level term assurance for family protection or decreasing term assurance to track a repayment mortgage.
Writing a life insurance policy in trust ensures the payout is distributed promptly to beneficiaries without waiting for probate and avoids UK inheritance tax.
Worked example: UK family protection
A UK earner with £38,000 net income seeking 10 years cover (£380,000), a £160,000 mortgage, £10,000 debts, £20,000 university fund, £4,500 funeral costs, and £20,000 savings needs £554,500 in recommended life insurance.
Inputs for the life insurance UK calculator
Annual Net Income
Net earnings your family depends on to pay everyday UK household bills.
Replacement Years
Years of income required until children finish school or university.
Mortgage Payoff
Total remaining balance on your UK residential mortgage.
Personal Debts
Outstanding personal loans, car finance, and credit card balances.
University Fund
Anticipated university tuition and living support for children.
Funeral Costs
UK average funeral and cremation costs (typically around £4,500).
Cash Savings
ISAs and cash deposits readily accessible to your surviving family.
Existing Cover
Death-in-service benefits through your UK employer or existing policies.
CALCULATOR QUESTIONS
UK life insurance calculator questions
Is life insurance payout taxable in the UK?
Life insurance lump sums are free from UK income tax and capital gains tax. If written in trust, they also fall outside your estate for Inheritance Tax.
What is death in service benefit?
Many UK employers offer death-in-service cover paying 2 to 4 times your basic salary if you pass away while employed.