How Much Life Insurance Do You Need? A Simple Calculation

Buy too little life insurance and your family could struggle. Buy too much and you pay for coverage you'll never need. The NAIC's buyer's guide boils the decision down to three questions: how much you need, for how long and what you can afford. This guide turns those questions into a calculation you can do in a few minutes.

The five-step method

1. Income to replace. Multiply the yearly income your family would need by the number of years they would need it. For example, $50,000 a year for 15 years = $750,000.
2. Debts to pay off. Add your mortgage balance, car loans, credit cards and other debts. Example: $250,000.
3. Future costs. Add big goals you want covered, such as college for your children, plus final expenses. Example: $100,000.
4. Subtract what you already have. Savings your family could use, plus existing life insurance, including employer coverage. Example: $150,000.
5. Result. $750,000 + $250,000 + $100,000 - $150,000 = $950,000. Round to a common policy size, such as $1 million.

Example figures for illustration only. Use your own numbers.

Your worksheet

What about "10 times your income"?

Multiplying your income by 10 or so is a popular shortcut, and it is fine as a first guess. But it ignores the things that make families different: a big mortgage, several young children, large savings or a spouse with a high income. Use it to sanity-check your result, not to replace the calculation.

How long you need coverage

The NAIC suggests thinking about how many years you will need the death benefit. For most families, the need is biggest when children are young and the mortgage is large, and it shrinks over time. That is why many people choose a term policy that ends when:

• the youngest child is expected to be financially independent,
• the mortgage will be paid off, or
• you expect to retire with enough savings to support your spouse.

Some people layer policies, for example a 30-year policy for part of the need and a 20-year policy for the rest, so coverage falls as the need falls. Read term vs. whole life to choose the type.

Special cases

• Stay-at-home parents: include the cost of replacing childcare and household work.
• Single with no dependents: you may need little more than enough for final expenses and debts someone else co-signed.
• Business owners: consider business debts and buy-sell agreements, which often need separate coverage.
• Employer coverage: Experian notes group life is often a multiple of salary and ends when you leave the job, so don't rely on it alone.

Make sure you can afford it

The NAIC's advice is simple: before you buy, make sure you can afford the premium. Term life is usually the most affordable way to buy a large amount of coverage. In MoneyGeek's October 2026 data, a healthy 40-year-old nonsmoker could buy $1 million of 20-year term coverage for about $86 a month (women) or $109 a month (men). See how much life insurance costs for more ages and amounts.