UK Life Insurance Needs Calculator — Methodology

Last verified 5 May 2026 against ABI consumer guidance on protection. Calculator at /uk/insurance/life-insurance-needs-calculator/.

What this calculator does

Estimates the sum assured a household needs from life insurance, using a needs-analysis approach that totals debts, income replacement, childcare, and education costs minus existing cover and liquid savings.

The formula

needs = mortgage
      + otherDebts
      + (annualIncomeToReplace × yearsOfReplacement)
      + (annualChildcare × yearsRemaining)
      + lumpSumForChildren
      + funeralCosts

resources = existingCover + liquidSavings + deathInService

recommendedSumAssured = max(0, needs - resources)

Authoritative sources

• ABI — protection insurance guides
• MoneyHelper — life insurance
• FCA Handbook ICOBS — protection insurance conduct

Assumptions and limitations

• Income replacement is modelled as a flat multiple of years × annual income; no NPV discounting is applied.
• Death-in-service benefit (typically 4x salary) is treated as fully available; some employer schemes restrict payouts.
• Inflation on future childcare and education costs is not modelled separately.
• Does not assess the type of policy (level term, decreasing term, whole-of-life) — the Mortgage Life Cover Calculator handles decreasing term sizing.
• Does not assess affordability of premiums — sizing only.

Source data

This calculator is rate-free — it does not depend on a tax-year rate table. The methodology and assumptions above are the source of truth.

Verification log

• 5 May 2026: Needs-analysis methodology reviewed during audit cycle 5; rate-free calculation