How much life insurance should you have? It depends on the size of your family, your financial obligations, your stage of life, and your financial goals. For example, when you're young, you might not have a great need for life insurance. However, as you take on more responsibilities and your family grows, your need for life insurance increases.

Learn the Basics

If you’re shopping for life insurance online, you’ll need to know how much coverage you want before you can get a quote. But what else do you need to know? If you’re new to life insurance, take a few moments to learn the basics to make sure you’re asking the right questions when you get a quote. You can always call or email me for more help.

Needs Analysis

To get an accurate quote, you may want to do a needs analysis for your family. An analysis will help you pinpoint your family’s current financial needs, along with future needs like college tuition. Once you have a clear picture of those needs, you can shop for a policy with confidence that you’re not over- or under-insuring.

A Rule of Thumb for Estimating Basic Life Insurance Coverage Needs

Senior woman asking, 'How much life insurance do I need?'

How much life insurance coverage do you need? It’s a big question – and I’ll try to help you answer it. The fastest way to get a straight answer is to get in touch with a life insurance agent (like me). It’s our job to ask the right questions that give us a sense of your needs, so we can make an educated recommendation for you.

Rather take a crack at it yourself? Let's do it!

The most basic rule of thumb for buying life insurance is to start with a death benefit that’s 10 times your yearly income. That may or may not cover everything you want to do, but it’s a start.

Your annual income x 10 = Starting figure for life insurance coverage

Example: $50,000 x 10 = $500,000

Can you use this amount of life insurance and start getting quotes? Of course. But, as you’ll see, there’s more to this question than meets the eye.

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Getting More Exact: How Much Life Insurance Do You Need?

How do you know when that starting figure is enough? This is where you need to go into more detail in deciding what you intend your life insurance to cover. These are questions that might take a little time to answer – your spouse probably wants to weigh in, too, since it affects the future of your whole family.

Young couple sitting on the couch together, working out an estimate for how much life insurance to buy
  • How old are your children? How many years until they turn 18? According to current estimates*, it costs about $310,605 to raise one child to age 18. As a baseline, that equates to $17,256 per year per child. Multiply this amount by the number of years you want to support each child.
  • Do you want to leave money to help pay your kids’ college tuition? The average cost of tuition and fees at an in-state public university is in the ballpark of $8,600 per year, as of 2022.**
  • Do you want to leave money to pay off the mortgage? Lots of clients don’t want to see their loved ones forced to move if anything happened to them. If this is something you want for your family, check your last mortgage statement and see how much is left to pay. Consider adding this amount to your coverage total.
  • How many years of income replacement & future expenses do you want to leave your loved ones? Multiply the number of years by the amount of your annual income. This income replacement gives your family the cash they’ll need to put food on the table, pay for utilities, school expenses, insurance, and more.
  • If you died today, how much debt would you leave behind? This includes things like credit cards, car loans, student loans, and personal loans. If you’re making payments on an asset your loved ones would probably sell (a boat, a motorcycle, a truck, etc.), don’t add this to your total.

Use the questions above to make a list of what you want your life insurance to pay for, and how much you estimate those costs to be. This rough total is how much you want your loved ones to have.

Dad and daughter doing math problems on a chalkboard

Next, it’s time to estimate how much you might already have available to offset those costs.

  • Cash: How much money do you have in checking accounts, savings accounts, and CDs?
  • Retirement: How much money do you have in your 401(k), IRA, or Roth IRA?
  • Physical Assets: Do you have any assets that your family could sell after you passed away to help pay off any of your debt? This includes second homes, cars, boats, artwork, etc.

Add up this second list, get a rough total, and subtract it from your first total. This is an estimate for how much life insurance you actually need.

(Debt + mortgage/household expenses + what you want your policy to cover) – current assets = Estimated figure for your life insurance coverage

For example: ($70,000 debt + $400,000 mortgage + $100,000 college fund) – $40,000 savings = $530,000

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Other Life Insurance Considerations

Senior couple working on their budget during retirement

As you’re making your decisions about how much life insurance you need, there are a few more things to consider. Because the type of coverage you choose affects your price, that may in turn affect how much coverage you can afford.

  • Term or permanent? There are two main types of life insurance. Term life insurance policies cover you for a limited length of time (up to 40 years), while permanent life insurance covers you until the day you die no matter when that is. Term is more affordable, while permanent policies cost more.
  • Non-med or medical exam? It’s more affordable to take the free life insurance medical exam and give the insurance company a better picture of your overall health. But if you’d rather not, for any reason, you can skip the exam with a non-med policy for a slightly higher price.
  • Employer-sponsored versus supplemental? You may think you have life insurance through work, but double-check how much coverage they provide. It’s probably a token amount, like $10,000 or less, intended only to cover your final expenses like burial and funeral costs. As you saw when you estimated your coverage needs above, that won’t go very far if you have a family you’d like to support after you’re gone.

It’s a lot to think about! That’s why we’re here to help. Give me a call and I’ll talk you through all of this – let’s calculate how much life insurance you need and check it off your to-do list!

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*Source:, "It's getting more expensive to raise children. And government isn't doing much to help." 8/30/22
**Source:, “Average Cost of College & Tuition.” 10/24/22