Life insurance is one of those things people know they should have but often put off because it feels complicated—or morbid. Let's simplify it.
The most common question I get: "How much coverage do I actually need?"
The Purpose Drives the Amount
Life insurance replaces your financial contribution to your family if you die. To figure out how much you need, ask: what would your family need to maintain their lifestyle without your income?
Consider:
- Income replacement: How many years of your salary should be replaced?
- Debts: Mortgage balance, car loans, student loans, credit cards
- Future expenses: College tuition for kids, spouse's retirement
- Final expenses: Funeral costs, medical bills, estate settlement
The Quick-Math Approach
A common rule of thumb: 10-12 times your annual income. If you earn $75,000, that suggests $750,000-$900,000 in coverage.
This works as a starting point, but it's just that—a starting point. Your actual needs might be higher or lower.
A More Precise Calculation
Try this approach:
-
Add up what you'd want covered:
- 10 years of income replacement: $750,000
- Mortgage balance: $280,000
- Other debts: $20,000
- College fund (2 kids): $150,000
- Final expenses: $15,000
- Total: $1,215,000
-
Subtract existing resources:
- Current savings: $50,000
- Existing life insurance: $100,000
- Spouse's income (covers ongoing expenses): -$200,000
- Total: $350,000
-
Your coverage need: $1,215,000 - $350,000 = $865,000
Common Mistakes to Avoid
Only buying coverage through work: Employer-provided life insurance is usually just 1-2x your salary—rarely enough. Plus, you lose it if you leave the job.
Ignoring stay-at-home parents: Childcare, household management, and other contributions have real financial value. Both parents typically need coverage.
Waiting too long: Life insurance premiums increase with age. A healthy 30-year-old pays far less than a healthy 45-year-old for the same coverage.
Over-insuring: You don't need to leave your family wealthy—just protected. Don't pay for more coverage than necessary.
Term vs. Permanent Life Insurance
For most families, term life insurance (coverage for 10, 20, or 30 years) offers the best value. You get high coverage amounts at affordable premiums during the years your family depends on your income most.
Permanent life insurance makes sense in specific situations—estate planning, business succession, or lifelong dependents—but costs significantly more.
Next Steps
Still not sure how much coverage you need? I'll walk you through the calculation based on your specific situation—no obligation, no pressure. Schedule a free consultation and let's make sure your family is protected.