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How much life insurance will provide your family with security?

May 06, 2024

Life insurance could ensure your family’s security if you pass away. It may be an important part of your financial plan and could provide peace of mind. Understanding the potential payout your family would need could help you choose an appropriate level of cover. 

If you take out a life insurance policy and pass away during the term, it would pay out a lump sum to your beneficiary.

The beneficiary may use the money how they wish. They might use it to cover day-to-day expenses or improve their long-term finances, such as paying off a mortgage. It could provide your loved ones with more security when they’re grieving. 

Life insurance can cover a defined period or the whole of your life. You’ll need to pay premiums to maintain the cover. 

According to Forbes, 37% of people in the UK currently have some form of life insurance. The findings indicate that a significant proportion of families could face financial challenges if someone passed away.

It’s not just the main income earner of your family that could benefit from taking out life insurance either. 

For example, if a parent who stayed at home to care for children passed away, it could mean the surviving parent would need to reduce their hours or pay a much higher fee for childcare. So, life insurance could provide valuable financial security in this circumstance. 

Just as important as assessing if life insurance could make sense as part of your financial plan is calculating what level of cover would be suitable.  

If you’re not sure what level of life insurance your family would need, these three methods to calculate cover could be a useful starting point. 

1. Link it to your large financial commitments

Families often think about financial protection, including life insurance, when they take on a large financial commitment, such as a mortgage. 

As a result, you may choose to take out life insurance that would allow your family to pay off debt. It could take a weight off their mind and mean their regular income goes much further.

If paying off existing debt is a key reason for taking out life insurance, you may choose for the level of cover to decrease over time. For instance, the potential payout would fall as you make mortgage repayments. 

2. Multiply your annual salary

If your family depend on your income, life insurance could provide a replacement source of money if you pass away.

Simply multiplying your salary by the number of years your family may need support could be useful. You may tie this to milestones, such as the age your children will reach adulthood. 

One thing to keep in mind is that life insurance will often pay out a lump sum. For some families, this can be difficult to manage, and it may also mean they need to make large financial decisions. Ongoing support from a financial planner could help your family use the payout in a way that suits them.

3. Work out your family’s essential outgoings

Taking some time to better understand your family’s outgoings, and which ones they’ll need to maintain following a financial shock, could help understand the minimum payout they would need to avoid financial challenges. 

Depending on your circumstances, you might also want to include non-essential costs that would help maintain your family’s lifestyle. Perhaps your children attend private school or sports clubs, and having to cut back on these expenses could disrupt their lives during an already difficult time. 

A tailored financial plan could help you understand your life insurance needs

While the above three methods can provide a useful guideline for calculating how much cover you’d like your life insurance to provide, making it part of your wider financial plan can help ensure it would cover your family’s needs.

We can help you pull together areas like your family’s:

  • Day-to-day expenses
  • Large financial commitments
  • Long-term goals
  • Other assets. 

In addition, we can factor in other steps you may have taken to improve financial security, such as an emergency fund, or protection that’s provided by your employer. 

By incorporating life insurance into your financial plan, you can choose cover that’s not only appropriate for you but complements other financial decisions. 

Contact us to discuss how you could improve your family’s financial security

Life insurance isn’t the only step you may take to improve your family’s financial security. Making it part of your tailored financial plan could mean you and your loved ones are in a better position to overcome financial shocks and reach your goals.

Please contact us to arrange a meeting to discuss your aspirations and concerns. We could work with you to create a financial plan that offers you peace of mind. 

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

What our clients say

The people we help are at the heart of what we do. Here are some of their testimonials.

I would highly recommend Darius and John. I’ve used a financial adviser previously and could never get in contact with them when I needed their help. Stratton Wealth Management have been excellent from the start. They are always available to talk, and they also don’t talk in financial jargon!

Dave Rigby -

A client since 2015

Having recently transferred my financial management to Stratton Wealth Management, I have been extremely impressed with the highly professional service I have received. I feel I have been fully involved in all decision making, and the company's highly skilled advisers have shown commitment and patience in any dealings I have had with them. I have also always found them to be easily accessible for any discussion I may require.

Denise Thornton -

A client since 2019

As a business owner and father of four children, finances are usually the last thing we think about. Stratton oversees and manages our finances, both in terms of advice for my business and our personal investments. It is comforting to know that our retirement, investment and life insurance planning has been taken care of. Darius and John are always so efficient in dealing with our affairs. As someone with no real understanding of the ins and outs, it has been fantastic to have experts giving us great advice and making sure our best interests are always the top priority.

Lee and Claire Parkinson -

Clients since 2016

Darius deals with my family’s finances and is a very trusted adviser. We meet a number of times a year, but I know I can call him any time if I have any questions. He is proactive, helpful and friendly!

Jonathan Dennis -

A client since 2019

Darius has been our adviser for a number of years, and when he told us he was starting his own firm, we had no hesitation in moving with him. We had a number of areas that we needed help with, including the complexities around an employee share scheme, investments for us and our new child, in addition to our retirement planning. Darius has continually provided us with a first-rate level of service and we would highly recommend Stratton.

Eamon and Holly O’Hara -

Clients since 2017

I knew I needed to begin saving and planning for the future but didn’t know where to start. Stratton helped me to understand my finances and put together a savings plan that is affordable and works for me. I now have and an ISA and a pension, and whilst retirement is many years away, I have the peace of mind that I am saving for my future. I look forward to working with them for many years to come.

Martin Corrigan -

A client since 2016

I have been impressed with the advice and service provided by Stratton Wealth Management and have always found Darius to be approachable, dependable and highly professional in his approach. It is reassuring to be able to have such a high level of confidence and trust when it comes to financial advice.

Russell Jones -

A client since 2018

Many thanks indeed for your in depth report for my client Mrs H – it is most thorough and above all readable. This might sound particularly strange; however you may well gather that in my profession we see many such reports, and I often feel that if the adviser fills it with charts and graphs it evidences a level of research. In truth most of what is produced is readily obtainable from the internet.

I would like to thank you (and your organisation) for your prompt and professional attention to my requirements on behalf of my client. As a practice we shall definitely be putting Stratton Wealth Management on our “preferred supplier list".

Colin Dunstall, Donaldson Dunstall Solicitors -

A client since 2015