How much and how long should Life Insurance be for?

hellojohn8doe7

Hello

I am a relatively new user to this website. My financial situation is at: forums.moneysavingexpert.com/showthread.php?t=6046688

I urgently need to buy Life Insurance + Critical Illness cover for me and my partner.

I have Death in service benefits from my current employer, however if my employment were to change, there is no assurance that the new employer will pay the same benefits.

I am not sure on how to
- decide what should be the length of my cover...
- what amount of cover should I apply...
- should it be level term or decreasing...

I understand the definitions of each, I am looking for what factors/variables I can use to arrive at a number.

harshitguptaiitr

this will depend heavily on your individual circumstances and I don't think there is a formula where you can just put in some numbers to get these values

however, what some people do is keep their life insurance term same as their mortgage term and level of cover same as mortgage amount at the time of taking cover. They take as decreasing cover , so amount of payout reduces with time, in line with mortgage. This approach is cheaper but it only protects your mortgage and nothing else.

Some couple with kids estimate how much money they will need per child per year until the child is 18 years old. They use this as amount of cover and keep term until their youngest child is 18 years old.

Another approach is 4 times your current gross salary with term as your 55th birthday or 25 years - whichever is later.

As you can see there all multiple approaches and it all depends on individual circumstances. Regardless from your original post at forums.moneysavingexpert.com/showthread.php?t=6046688, I would suggest you have a cover in place for financial protection of your family.

SonOf

- decide what should be the length of my cover...

You set the term of the life assurance to match the term of the financial need. If you have multiple objectives with different terms then you take out multiple policies or use a multi-segment plan (where different segments within one plan can cover the different objectives)

- what amount of cover should I apply...

Around 20x income plus liabilities minus savings and pension if DC. If DB pension then you make the adjustment in the income but only go by the current entitlement not a future entitlement (as you only get future entitlement whilst you live).

- should it be level term or decreasing...

Whichever matches the objective.