Location, location, location: how much life insurance do residents in different areas of the UK believe they need?
One of the biggest areas for financial concern for people taking out life insurance is making sure the cost of repaying their mortgage is taken care of if they die. Mortgage payments may be the largest outgoing someone has to pay each month, so if a household’s income was dramatically reduced due to the death of a family member this could put huge financial strain on their dependants.
Unsurprisingly, Londoners were found to have the most left to pay on their mortgages, with payments averaging £152,727 for those that don’t have life insurance. People living in the capital were also least likely to have life insurance (70 per cent) compared with other areas of the UK, posing a risk to dependants who may be relying on someone else’s salary to contribute towards these payments.
Those living in the South East (£117,885) and North West (£113,378) came second and third respectively in terms of the highest amounts left to pay on their mortgages, but it's good news if you live in the North East - people living here have only £38,636 left to pay on average.
But how much life insurance do people in these regions believe they need?
While those in London, the South East and North West had the largest sums still to pay on their mortgage, they also estimated that they'd need more life insurance cover than the other regions with Londoners putting the figure at £134,156 compared to £126,069 in the North West and £117,959 in the South East.
Conversely, residents from Northern Ireland thought that they would need the lowest life insurance cover of all regions, with their total sum of £57,105 being less than half that of the estimated cover across all three regions.
How to calculate how much life insurance you need
Life insurance can provide peace of mind that your loved ones will be financially looked after if you were to die unexpectedly. Ask yourself whether your dependants would be financially secure without you. Would they be able to cover daily expenses and mortgage repayments?
And if you’re part of a couple, consider a joint policy that covers you both. Even if your partner is not earning an income, he or she should be insured. The policy proceeds could then take care of paying for childcare, cleaning or other needs if they were no longer around.
Some advisors recommend that life insurance worth ten times your annual salary is a good guide to the amount you need, but everyone’s situation is different. You will need to determine what sum you require to cover your financial commitments, so it’s worth considering:
- Your dependants – do other people in your family rely on your income? This might be a partner, children or even a friend you own a home with. How much do you pay to cover childcare costs, your children’s education, and bills (such as your mortgage)?
- Your monthly income. Are you the sole earner in your family? If so, consider how your loved ones would be affected if they could no longer count on your salary coming in every month
- Whether you have life cover as an employee benefit - check with your employer. It probably won’t be as much as you need, but it will reduce the additional amount you need to get.
Additionally, calculating your monthly take-home pay after tax can be a good place to start. From this you can deduct any bills that won’t need to be paid in the event that you pass away, for example, gym membership and mobile phone bills. By multiplying this figure by 12 you will find out the annual amount your family would need to maintain their current standard of living, although you may want to give yourself a little margin for error.
Once you have calculated a rough sum, you then need to consider what type of life insurance policy is best for you. It’s worth reading up on all options and to find a policy that’s best suited to your needs.
Compare life insurance quotes
Comparing life insurance quotes can help you find the right policy for you at the right price. You can use MoneySuperMarket’s life insurance comparison tool to compare both single and joint life insurance quotes.
All you do is answer a few questions about you, your health and lifestyle, and the amount of cover you need. You can then choose whether you want to take out level term or decreasing term cover.
Some prices will be guaranteed and fully underwritten which means you can buy immediately. Others will ask you to confirm certain details with the insurer.
If you want to add critical illness cover to see how this affects the cost of life insurance then you can do this by selecting ‘Add critical illness cover’.
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