Life Insurance Calculator Explained
We believe you should have life insurance for two main reasons:
- To repay any debts you might have in the event of your death, this would include mortgages, credit card and any other loans or liabilities.
- To replace your income so that your dependants can continue to pay the household bills etc. Covering your mortgage is just half of the job… your dependants will then need to also put food on the table, pay the gas bill etc.
The Formula
On the basis that most of us rely on all of our salary to maintain our lifestyle the figures we have come up with should allow most families to protect their lifestyle.
If you have dependants we aim to replace 50% of your pre-tax income using a lump sum that could be invested to provide a similar level of income, as a guide we give you an idea of what size the lump sum could be. The term of the plan chosen should either be designed to take your youngest dependant through to the age of 21, or if applicable, to cover the term of your mortgage, whichever period is the longest. If you feel your dependants will rely on you financially beyond the age of 21 then you need to take this into consideration.
If you don’t have dependants then the calculator aims to replace 30% of your pre-tax income using an invested lump-sum, and we would suggest that the term chosen should take you up to your retirement age or should be long enough to cover your mortgage, again if applicable.
Calculate how much life insurance you need.
Warning
The calculator should only be used as a guide. Everyone’s requirements and situation are different, and the calculations within this calculator are very basic and may not be suitable for everyone. The suggested sum assured is not a recommendation, and should only be used as a general guide to the amount of cover you might need.
We recommend that you seek expert advice before determining the amount of life insurance cover you require.
