How much life insurance do I need?


A good rule of thumb is getting life insurance coverage that's 10-12 times your income, but it depends on your individual financial circumstances.


Elissa Suh

Published April 1, 2019


  • Most people need life insurance that's 10-12 times their income

  • There are five main financial obligations to take into account

  • Policygenius' free life insurance calculator can help you calculate your coverage needs

For many people, buying a life insurance policy is a smart move that will ensure financial coverage for family and loved ones. How much life insurance you need will vary based on personal and financial circumstances, but essentially you need enough to replace your income and cover your dependents' expenses, including future ones.

An easy formula for calculating how much life insurance you need is: Resources (income and liquid assets) - Financial obligations (expenses and debt) = Recommended life insurance death benefit. Most people should aim for 10-12 times their income.

We’ll explore the considerations you should take when you’re shopping for life insurance coverage to buy and provide you with an example and some resources.

In this article:

Financial obligations

Adequate life insurance coverage comes down to a “needs-based analysis” that takes stock of everything you pay for, or would need to pay for in the future. If you aren't sure where to start, consider the following.


If you die with outstanding debt, your survivors may be responsible for all or part of it if they co-signed the loan. This could mean a spouse who co-signed your mortgage or your child who co-signed a student loan might ending bearing the financial burden. They will not be responsible for any debt they haven’t co-signed.

You want to leave enough for your beneficiaries to continue paying off loans, especially if they were secured by collateral that your dependents need to continue using, like your home or the family car. Even if they don’t live in the mortgaged house or drive the car, they may want to inherit either of these in the future, but creditors will have first dibs and may be able to seize the asset to recoup debt payments.


Factor in the cost of raising a child or caring for an aging parent. If you have any dependents, you may need to increase your policy amount by several hundred thousand dollars.  Because parents come from all walks of life, different circumstances necessitate different needs and amounts of coverage. Whether you’re an expecting parent or empty-nester, there’s an appropriate amount of life insurance suited for you.


If you have kids, you might want to factor in the cost of a college education in your decision to get life insurance. Higher education can provide upward mobility and a comfortable life for your children later on, but paying tuition can be one the biggest expenses of adult life.

Plan for what college will cost in the future, likely to increase when you buy your policy today. According to College Board, in the last decade the average tuition at a four-year private college went up by almost $8,000.

Financial cushion

When considering how much life insurance coverage you need, take stock of what you provide for your family. That might include necessities like food and medical expenses, or discretionary costs like family vacations. To get an idea of how financially dependent on you your loved ones are, add up your monthly bills and fixed expenses.

End-of-life expenses

The average funeral expenses range from $7,000 to $10,000 once you factor in the funeral home and burial costs, like the casket. Many policy holders work these final expenses into their coverage so their families don’t bear a financial burden on top of the emotional toll of losing a loved one.

Personal considerations

While financial obligations are important, there are also factors to consider regarding your personal situation.

Health and age

Your health and age will determine not only how much insurance you should buy, but for how long you'll want to get it. The older you get, the less coverage you need because you will hopefully have less debt and fewer dependents to support.

However, while age is an important consideration when setting your coverage amount, it is not a reason to put off getting a policy. Life insurance rates increase with age. After all, the older you are, the closer you are to death, and a higher likelihood of death results in higher premiums.

So if you purchase a policy when you’re young and healthy, you’ll get a more affordable rate for a potentially larger amount of coverage. For that reason, it’s best to lock in a good rate as soon as you have an insurable need.


How much life insurance can you afford? A life insurance policy isn't of use to you if you can't afford it. That's why it's important to consider how much you'll be able to pay in premiums each month. Higher coverage amounts equal higher premiums.

First you will need to decide between term and whole life insurance. Term insurance lasts a set number of years and then expires; whole life insurance lasts as long as you pay the premiums. Whole life insurance can be six to 10 times as expensive as a term policy, so most shoppers — especially those on a budget — should opt for term insurance.

Learn more about the differences between term and whole life insurance.

Fortunately, term life insurance is more affordable than many people think. For example, a healthy 30-year old male will pay $36.25 per month for a $750,000 policy that last 20 years. You can also minimize the cost by opting for a smaller coverage amount or a shorter plan.

The exact price of a life insurance policy depends on a number of individual factors including your medical history, lifestyle, and driving record. You can learn more about shopping for life insurance and get a personalized quote from the experts at Policygenius.


Policygenius is the easy way to compare life insurance.

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– The Wall Street Journal

How much life insurance should I get?

Term insurance is available between $20,000 and $10 million. People in their 30s and 40s most commonly purchase policies that provide between $250,000 and $1 million in coverage. Keep in mind, these coverage amounts are how much people actually elect to buy, but they don’t necessarily reflect how much coverage is ideal.

Follow these steps to find out how much life insurance coverage you need:

  • Tally up your resources (after-tax income, liquid assets)
  • Expenses + debt = financial obligation
  • Financial obligation - liquid assets = coverage gap
  • Coverage gap = how much life insurance you should get


Imagine a fairly typical American family: a four-person household comprised of two parents and two kids, a 3-year old and 5-year old. Assume you earn $65,000 a year and have assets totaling an additional $20,000. These are your resources.

Income (before-tax)$65,000
Income (after-tax)$50,000


Next take into account your expenses—including the cost of raising a child—and your debt.

The USDA estimated the cost of raising a child was nearly $14,000 annually for a child born in 2015. Adjusting for inflation, the figures above are based on a $15,000 cost per year for each child until they turn 18 years old. (The USDA also has their own calculator to figure out the cost of raising a child based on their data.) The college tuition cost assumes each kid goes to a private, out-of-state, four-year university.

Five years of support ($50,000/year income)$250,000
Raising two kids (ages 3 and 5)$420,000
College tuition$320,000
End-of-life expenses$10,000
Total expenses$1,000,000

Debts and liabilities

Credit card$3,000
Auto loan$17,000
Total debt$520,000

Adding your expenses and debt gets you your total financial obligation, which is about $1.52 million here. Next, subtract from that your assets ($20,000).

Recommended life insurance coverage

Financial considerationCalculationAmount
Financial obligationexpenses + debt$1.52 million
Coverage gapfinancial obligations - assets$1.5 million

What's left over is a $1.5 million coverage gap. This is ideally how much insurance you should buy.

After you’ve purchased your policy, you may find later on in life that your needs have changed. In this case you can adjust your coverage with a rider. Insurance riders are provisions to your policy that could come at an added cost.

Life insurance calculator

Doing the math by hand to calculate the life insurance cost is a good idea, but it can be time consuming.

Use this easy life insurance calculator to determine how much money you need to cover your financial obligations. It will automatically add up your debt and expenses, take into consideration your assets and how long you need coverage to last. With a few easy inputs, it will determine your coverage gap, which tells you how big your policy’s death benefit should be.

Who doesn’t need insurance?

Your need for life insurance depends a lot on where you are in life and whether you can afford the premiums with your income.

Here are a few instances in which you might not need a policy:

Low-income earners

Those with a lower-income may have a hard time finding room in their budget for a policy. However, term life insurance in particular is more affordable and to minimize cost you can opt for less coverage or a shorter plan.

For some, the price of insurance may still be too much in their financial situation, in which case it's better to focus on building savings first to meet your immediate needs.

Young singles

If you’re single, and don’t have kids, you probably don’t need that much life insurance. But you still might want to be prepared if that ever changes, since you’d net a lower policy while you’re still young and healthy.

Even if you’re single, you could always direct your life insurance plan proceeds to a charity or institution of your choice by naming it as your beneficiary.

Group life insurance

Some workplaces offer subsidized coverage through a group life insurance plan, so you might not need to buy your own individual policy. However, you may find that the coverage provided by your employer does not meet your needs, so additional coverage can supplement your employer’s plan. Check with your benefits administrator to see what your coverage is like.


Those who are self-insured, or have the funds and means to stay afloat and provide for themselves and their family, may not need life insurance. This might be a retiree who is financially free and doesn’t support anyone, or the fabulously wealthy who have enough funds stashed away to provide for their entire family.

Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.