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Mr Briggs says that a better way of deciding how much life assurance you need is to work out how much income your family would need if you were not around. He says: “You can then calculate the lump sum needed to produce that level of income. Taking out family income benefit is easier because you will know exactly how much your family will receive and it also means that your spouse is not faced with the problem of having to decide how to invest a large lump sum.”

There is also some flexibility with family income benefit. If the worst does happen, your beneficiaries can decide to swap the remaining income payments for a lump sum if they prefer.

How much do you need?

To calculate how much cover you need, first decide if you want a lump sum or family income benefit, or a mixture of both.

For a lump sum, tot up how much you owe (mortgage and loans). Then calculate how much more money you need to cover other household expenses, such as insurance and council tax. For example, if you have debts of £170,000 and annual bills of £8,000 a year, you will need a lump sum of £330,000, assuming a return of 5 per cent a year.

A look at your bank statement is enough to work out how much family income benefit you need — simply tot up your monthly outgoings.

Alternatively, you can clear debts with a lump sum and use family income benefit to provide a monthly income.

CASE STUDY: Future guaranteed

Darren Scarr purchased additional life assurance recently to protect his wife, Christina, and children, Dannielle, 8, and William, 5.

The 38-year-old, pictured with his wife and children, is director of a precision engineering company in Co Durham. He already has insurance on his endowment mortgage but realised that his family required a greater level of protection.

He says: “I was aware that if anything happened to me, my wife, who works part-time, would not be able to afford to continue to live in this house, which is where we want our children to grow up.

“I had been planning to take out £150,000 of term assurance, but when I approached Lifesearch and the firm explained how family income benefit policies work, I decided that it would make more sense to take out that type of policy. I now have a family income benefit policy for £24,000 a year for 25 years. If anything happens to me, my family will get £2,000 a month to help to cover the cost of household bills and expenses.”

Mr Scarr took out a policy from Legal & General and pays a monthly premium of £22.07. Potentially, the policy could pay out up to £600,000 (£24,000 x 25).

Mr Scarr says: “I like the idea that this policy will provide my wife with a guaranteed income so that my children’s lives won’t suffer if anything should happen to me.

“I did think about future expenses, such as the cost of sending the children to university. But financial burdens tend to become easier as time goes by, so hopefully my wife would have enough money in ten or thirteen years’ time to help the childen when they go to college.”

For more on insurance visit www.timesonline.co.uk/insure

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