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Start With Who Actually Depends on Your Income

Life insurance is not a box everyone has to tick. It solves one specific problem: if you died, would the people you leave behind manage financially? If the honest answer is yes — nobody would lose their home, nobody's standard of living would tumble — you can probably put that money to better use. If the answer is no, cover deserves serious consideration.

Ask yourself three questions. Does anyone share a mortgage or rent with me? Would a partner, child or parent struggle without my wages? Do we have debts that would land on someone else? A couple of yeses means you should at least price up a policy.

One UK quirk is worth flagging: there is no such thing as a "common law marriage". If you are unmarried and living together, your partner has no automatic right to inherit anything — including your workplace death-in-service payout, which usually goes wherever the pension scheme's nomination form says. Life cover sits alongside a will and updated nominations as part of the same conversation.

Do the Sums Before You Buy Anything

Work out what your household would actually need, not a round number plucked from the air. Add up:

• The remaining mortgage balance, or the rent if your family would want to stay put
• Other debts, including car finance, credit cards and personal loans
• Childcare costs if you are the primary carer or share the school run — nursery fees can comfortably hit four figures a month per child in many parts of the UK
• Living costs for the years ahead, covering the gap between what the household earns and spends
• Funeral costs, typically several thousand pounds
• A buffer for ordinary shocks such as a broken boiler or a car failing its MOT

Then subtract what is already in place: savings, investments, an employer's death-in-service scheme (often three or four times salary) and any existing policies. Bereavement Support Payment exists, but it is modest and time-limited, and it will not cover a mortgage. Many people find the gap is smaller than they feared — or much bigger than expected.

What the Money Is Really For

The point of a payout is not to make anyone rich. It is to buy time and remove one large decision from an already awful year. Most families use it for one of four things:

• Clearing the mortgage so housing is no longer a worry
• Replacing a salary for a few years while the surviving partner adjusts
• Funding childcare so someone can keep working
• Covering school or university costs down the line

If you want to match a repayment mortgage, decreasing term cover is usually the cheapest route. If the priority is a regular income rather than a lump sum, family income benefit can work well. For a fixed amount regardless of the mortgage, level term is the straightforward option. Most policies are cheap when you are young and healthy — a healthy non-smoker in their early thirties can often buy a few hundred thousand pounds of cover for roughly the price of a couple of streaming subscriptions each month.

When You Can Comfortably Skip It

Plenty of households do not need life cover, and pretending otherwise wastes money. You can generally pass if:

• You are single with no children and no one else depends on your income
• You have no joint mortgage or joint debts, though it is worth checking the terms of any loan you took out together
• Your savings, workplace benefits and investments would already cover everything on the list above
• You are retired with a secure pension and grown-up, independent children

Do be careful with "we have death in service, that will do". Check the multiple, check whether the scheme is written in trust, and check the nomination form is up to date. Plenty of people discover the cover was never enough once a mortgage and children arrive.

Life Cover Is Not the Same as Income Protection

Life insurance pays out when you die. It does nothing if you are ill, injured or unable to work for six months. That is a different product — income protection — and critical illness cover sits alongside it, paying a lump sum on diagnosis of a specified condition.

For many working households, the risk of being unable to earn for a year or two is more likely than the risk of dying, and the financial damage can be just as severe. If your budget only stretches to one policy, think carefully about which risk you are most exposed to, then check what your employer already provides in sick pay.

Fitting Cover Into the Budget

A workable policy should cost a small, predictable slice of your monthly income — a decent rule of thumb is to keep premiums under about 1% of household take-home pay, and never at the expense of an emergency fund. Build that pot first if you are choosing between the two.

• Buy level term rather than an over-50s plan paying a small fixed sum; if you are healthy enough for mainstream cover, it is usually better value
• Write the policy in trust — it keeps the payout outside your estate for inheritance tax and avoids the delay of probate
• Unmarried couples often do better with two separate policies than one joint policy, which pays out once and then ends
• Review cover after a mortgage, a new baby, a pay rise or a separation; old policies quietly become the wrong size

Be honest about the trade-off. If cover competes with food, heating or debt repayments, fix those first and revisit the question in a year. A policy you cancel after four months has helped nobody — least of all the people you were trying to protect.