How Much Life Insurance Do I Need?

You need enough life insurance to cover your obligations after you’re gone. Start by looking at your existing financial needs and resources.
Georgia RoseAug 19, 2021

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It’s hard to pinpoint how much life insurance you should buy down to the penny, but you can make a good estimate by using our life insurance calculator below.

In general, you should add up your long-term financial obligations, such as mortgage payments or college fees, and then subtract your assets. The remainder is the gap that life insurance will have to fill.

This life insurance calculator uses your existing assets and debts to figure out how much life insurance coverage you need. If you need help figuring out your assets and debts, there are additional calculators at the end of this article to help you calculate those values.

Follow this general philosophy to find your own target coverage amount: financial obligations minus liquid assets.

Step 1: Add up the following items to calculate your financial obligations:

Step 2: From that total, subtract liquid assets, such as savings, existing college funds and current life insurance policies.

The number you’re left with is the amount of life insurance you need.

If you want to quickly determine your existing life insurance needs, an estimate can be an easy way to get a value. These methods are better than a random guess but often fail to account for important parts of your financial life.

Use the calculator above to get a more refined idea of how much life insurance you need, then compare that value to these estimates.

The “10 times income” guideline is often shared online, but it doesn’t take a detailed look at your family’s needs, nor does it take into account your savings or existing life insurance policies. And it doesn’t provide a coverage amount for stay-at-home parents, who should have coverage even if they don’t make an income.

The needs to be replaced if he or she dies. At a bare minimum, the remaining parent would have to pay someone to provide the services, such as child care, that the stay-at-home parent provided for free.

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This formula adds another layer to the "10 times income" rule by including additional coverage for your child’s education. College and other education expenses are an important component of your life insurance calculation if you have kids. However, this method still doesn’t take a deep look at all of your family’s needs, assets or any life insurance coverage already in place.

This formula encourages you to take a more detailed look at your finances than the other two. DIME stands for debt, income, mortgage and education, four areas that you should account for when calculating your life insurance needs.

By adding all of these obligations together, you get a much more well-rounded view of your needs. However, while this formula is more comprehensive, it doesn’t account for the life insurance coverage and savings you already have. It also doesn’t consider the unpaid contributions a stay-at-home parent makes.

Keep these tips in mind as you calculate your coverage needs:

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Use the calculators below to get a sense of how much life insurance coverage you'd need to replace your current salary and any debts you're carrying.

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