How Much Life Insurance Do I Need?
A multiple of income, like "10x salary," is a rough starting point, not a personalized answer. What a household would actually need to replace generally depends on debts, years of support required, childcare and education goals, final expenses, and what coverage and savings already exist.
Start from obligations, not a formula.
A multiple-of-income shortcut can be a quick way to begin a conversation, but it ignores the specific shape of a household's debts, goals, and existing resources.
Coverage needs generally reflect what obligations would continue, for how long, and what resources already exist to meet them. That includes a mortgage or rent, childcare or eldercare, education goals stated honestly as goals rather than guarantees, final expenses, and any non-wage contributions such as caregiving. It's then offset by existing savings, investments, and coverage already in place.
Two households earning the same income can reasonably land on very different numbers because their obligations and existing resources differ. This page does not recommend a specific coverage amount or product for any individual.
A hypothetical obligations inventory.
Every figure below is a clearly labeled hypothetical for illustration only — not a quote, projection, or promise of cost, premium, or benefit.
| Item (hypothetical) | Illustrative figure | Note |
|---|---|---|
| Remaining mortgage balance | $240,000 | Hypothetical only — insert your own figure |
| Income replacement, 10 years | $550,000 | Illustrative multiple of a hypothetical salary |
| Childcare through age 12 | $90,000 | Estimated, not a quote or guarantee |
| Education goal, two children | $120,000 | A goal figure, not a promise of cost |
| Final expenses | $15,000 | Rough planning figure only |
| Existing savings and investments earmarked for this | -$60,000 | Reduces the illustrative total |
| Existing group life insurance through employer | -$100,000 | Confirm portability separately |
This worked example is entirely hypothetical, for illustration only, and does not reflect any actual household, quote, or offer. Your own numbers will differ.
What a simple multiple leaves out.
It ignores debt structure
A mortgage nearing payoff and one just originated create very different obligations, even at identical incomes.
It ignores existing coverage
Group life through an employer, or an older individual policy, changes what additional coverage would need to fill in.
It ignores non-wage contributions
Caregiving, household management, and transportation have real replacement costs even without a paycheck attached.
It ignores time horizon
Support needed for two more years of childcare is a different problem than support needed for eighteen.
Questions worth asking before any number is discussed.
- Which obligations would continue, and for roughly how many years?
- What existing coverage or savings are already earmarked for this purpose?
- How would term and permanent coverage each fit a temporary versus a long-lasting need?
- What happens to coverage if I change jobs or my health changes later?
- How does this interact with disability income protection or long-term care planning?
- Nothing sensitive is needed to start a first conversation — no balances or medical history.
Where households often go wrong.
- • Applying a single income multiple without listing actual obligations.
- • Forgetting to subtract existing group or individual coverage from the total.
- • Leaving out non-wage contributions of a stay-at-home parent entirely.
- • Treating an education savings goal as guaranteed rather than a stated goal.
- • Never revisiting the number after a mortgage refinance, new child, or job change.
Work through your own inventory.
Request the worksheet and it opens right here on this page — nothing is emailed and there is no attachment.
Related reading
The needs number is one piece; how term and whole life fit different needs is the next question.
Life insurance needs questions.
Where to read the underlying material.
- NAIC — Consumer resources on insurance
- Social Security Administration — Retirement and survivor information
- Investor.gov — Free financial planning tools (SEC)
This article is educational and general in nature. It is not individualized financial, tax, or legal advice, and it is not an offer, application, or recommendation of any insurance product or coverage amount. Figures shown are hypothetical illustrations only. Laws, tax rules, plan terms, and product availability can change, and no approval, price, or benefit is guaranteed. Full disclosures and contact Sarah.