How Much Life Insurance Do I Need?

How Much Life Insurance Do I Need?

Mar 10, 2022

Many expenses are relatively easy to estimate. Loan payments, utilities, and grocery budgets rarely change from month to month. However, some finances are more difficult to determine. For example, a life insurance policy can change for many reasons. This may make the right coverage tough to calculate. We’re often asked, “How much life insurance do I need?” Let’s answer this question in detail.


It can be tricky to estimate the amount of life insurance that you need. First, mortality is a hard topic to consider. It’s simply not what most people enjoy discussing. However, a life insurance policy is crucial for your loved ones in the event of an untimely death. Second, figuring out the right amount of life insurance coverage can be a difficult process. It involves trying to estimate the costs that will need to be addressed in your absence. Fortunately, this process doesn’t have to be frustrating. Here are some general guidelines.

A Detailed Method of Estimating Life Insurance Coverage

Some basic notes and a simple calculator can be helpful when starting out. The first step in estimating your needs involves calculating your unique expenses. Add up the following:

With this total in mind, the next step is to add up your total amount of assets. Include things such as:

Finally, subtract your assets from your estimated expenses. The remainder is a rough estimate of the coverage for your unique needs.

An Estimated Method

There are other popular ways of estimating your insurance coverage. One strategy is the “10 Times Income Plus” method. Begin by multiplying your annual income by ten. This serves as the base amount. Then, calculate anything else that you would like to add to the formula. Typically, you may add $100,000 for each child who will go to college. Factor in childcare expenses if you have young children that will need care while the other parent works. This method isn’t as detailed, but it can provide a fairly accurate estimate at a glance.

How Much Life Insurance Do I Need?

These estimates are a good baseline for most people. However, a number of factors will influence the ideal type of life insurance policy for your unique needs. Some additional expenses are worth considering.

  1. Major Life Events

    Major life events will undoubtedly change your insurance coverage needs. They include things like career or job change, marriage, divorce, and adding a child or dependent. Such events can drastically change one’s annual income or expenses and will require a review of many things including your life insurance policy.

  2. Medical Needs

    There are times when a major medical diagnosis will change your financial outlook. For example, if your spouse suffers from cancer, you will want to update your life insurance policy. Make sure it will cover any added expenses in the event of your passing.

  3. Age of Children

    Many people think about college funds when they consider a life insurance policy. However, others fail to include daycare costs. If you have young children, it’s important to remember this major expense. Childcare can be costly, especially for busy single-parent households. Be sure to factor this in if it applies to you.

Answering the question of “how much life insurance do I need?” can be stressful. If you’re still unsure, our qualified agents would be happy to clear up any questions. We have proven track record of helping our clients get the answers and coverage they need. Feel free to contact us for more information or for a free quote today.

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I have known Mike for nearly 50 years and have known him as a business professional and insurance agent for nearly 20 years. Mike has written the insurance on all my family’s autos and homes since he entered the business as an insurance professional. I have known Mike to be for...Patrick D.Lincoln NE
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