Why should mortgage debt come first when working out a sum assured?

Clearing the mortgage removes the single largest, most time-pressured debt your family would face, so it is the natural starting point before anything else is added. Loans and credit cards come next, because they are also immediate obligations rather than ongoing costs. Only once these fixed amounts are totalled does it make sense to add income replacement and specific costs such as childcare or a funeral. Starting with debts keeps the calculation grounded in figures you can check against statements, rather than a guessed round number.

How do I work out the income replacement part of the calculation?

A common method multiplies your net annual income by the number of years until your youngest dependant becomes financially independent, which gives a quick estimate. The more honest figure uses your household’s actual outgoings rather than income, multiplied by the same number of years, since outgoings reflect what the money would actually need to cover. Either way, the years-until-independence figure drives the result, so it is worth checking carefully rather than guessing, and revisiting it whenever a child’s circumstances change.

What should I subtract before settling on a final sum assured?

Subtract anything that would already meet part of the need: savings you would be prepared to commit, any existing life policies, and employer death-in-service benefits, which are often a multiple of salary set out in your employment contract rather than something to assume. Once these are taken away from the combined total of debts, income replacement and specific costs, the figure left over is the genuine gap a new policy should fill, rather than a shortcut like ten times salary. Write the sum down with its date.

Life insurance

How much life insurance do I need?

The short answer

Add up what the money would need to do: clear the mortgage and other debts, replace your income for the years dependants rely on it, and cover specific costs such as childcare or a funeral. Then subtract savings, existing policies and employer death-in-service benefits. The gap is the sum assured worth quoting for.

Written by Emma Leadbetter. Reviewed by Stuart Hendy.

Published 15 September 2026. Last reviewed 15 September 2026. Next review due 15 December 2026.

What to know about working out how much life insurance you need

Start with debts that would fall due, clearing the mortgage first and then loans and credit cards. Read more
Add income replacement, multiplying actual outgoings by the years dependants need support. Read more
Add specific costs such as funeral expenses, then subtract savings, benefits and any existing policies. Read more
The remaining gap, not a round multiple of salary, is the sum assured worth quoting for. Read more

Thinking about working out how much life insurance you need

What works well

The needs method ties cover to real outgoings, not round numbers.
Subtracting existing benefits avoids paying for duplicated cover.
A written calculation is easy to review and update.

What to watch

Employer death-in-service ends when the job does.
Inflation erodes a level sum assured over long terms.
Underestimating childcare years is the most common gap.

The arithmetic, in the right order

Start with debts that would fall due: the mortgage first, then loans and cards. Add income replacement — a common working method is your net annual income multiplied by the years until your youngest dependant is financially independent, though the honest number is your household’s actual outgoings multiplied by those years. Add specific one-off costs you want covered, such as funeral expenses — SunLife put the average cost of a simple attended funeral at £4,285 in its Cost of Dying Report published in January 2025, with the wider cost of dying at £9,797. Then subtract what already exists: savings you are prepared to commit, employer death-in-service benefits (often a multiple of salary — check your contract, not your assumptions) and any existing policies. The remainder is the gap a policy should fill. Round numbers like “ten times salary” are shortcuts past this arithmetic, not substitutes for it.

Write the calculation down with dates and sources, and revisit it after every major life event — a new child, a new mortgage or a paid-off one all move the number. Whatever the specifics of working out how much life insurance you need, the discipline that protects your family is always the same: get the insurer’s position in writing, keep the documents with the policy, and make sure the people who would claim know the policy exists and where the paperwork lives.

Related guides

Common questions

Why should mortgage debt come first when working out a sum assured?: Clearing the mortgage removes the single largest, most time-pressured debt your family would face, so it is the natural starting point before anything else is added. Loans and credit cards come next, because they are also immediate obligations rather than ongoing costs. Only once these fixed amounts are totalled does it make sense to add income replacement and specific costs such as childcare or a funeral. Starting with debts keeps the calculation grounded in figures you can check against statements, rather than a guessed round number.
How do I work out the income replacement part of the calculation?: A common method multiplies your net annual income by the number of years until your youngest dependant becomes financially independent, which gives a quick estimate. The more honest figure uses your household’s actual outgoings rather than income, multiplied by the same number of years, since outgoings reflect what the money would actually need to cover. Either way, the years-until-independence figure drives the result, so it is worth checking carefully rather than guessing, and revisiting it whenever a child’s circumstances change.
What should I subtract before settling on a final sum assured?: Subtract anything that would already meet part of the need: savings you would be prepared to commit, any existing life policies, and employer death-in-service benefits, which are often a multiple of salary set out in your employment contract rather than something to assume. Once these are taken away from the combined total of debts, income replacement and specific costs, the figure left over is the genuine gap a new policy should fill, rather than a shortcut like ten times salary. Write the sum down with its date.