How Much Life Insurance Do You Need?
The income-replacement method, minus what you already have. A printable needs analysis in two minutes — no quote form.
Your Situation
Your Protection Gap
Estimated uncovered gap
Income replacement = income × support years × 0.7 (assumes spouse continues working and replaces ~30%).
How the Needs Analysis Works
This calculator uses the standard income-replacement framework most licensed agents walk through in a first meeting. It adds up four buckets, then subtracts what you already own:
- Income replacement — annual income × years of support needed × 70%. The 70% factor assumes your spouse continues to earn and replaces roughly 30% of household income; the policy covers the rest so the family's standard of living holds.
- Debts — mortgage balance plus other debts you don't want to leave behind.
- Future obligations — education funding goals and final expenses.
- Minus existing coverage — employer-provided life insurance, existing term policies, and assets the family could liquidate.
The result is the gap: the amount of new term coverage worth shopping for. If the gap is small or zero, a modest final-expense policy may be all you need — no need to overbuy.
Common Rules of Thumb (and Their Limits)
The "10-15x income" shortcut is a useful sanity check, but it ignores debts, existing coverage, and how many years support is actually needed. A 30-year-old with no kids and a small mortgage needs far less than 10x income; a 40-year-old with three children and a large mortgage may need more than 15x. The bucket method above handles both cases — use the shortcut as a cross-check, not the answer.
When the Gap Is Zero
If your assets and existing coverage already cover the buckets, congratulations — you may not need additional coverage. Some families still buy a small term policy to cover final expenses (funeral, probate, uninsured medical bills), which typically runs $10,000-$20,000 and is inexpensive at younger ages.
Methodology & Data Sources
The 70% income-replacement factor and bucket structure follow standard financial-planning practice (see LIMRA research on income-replacement ratios and the American Council of Life Insurers' needs-analysis guidance). Final-expense benchmarks of $10,000-$15,000 reflect 2024-2025 NFDA funeral cost data. This is an educational estimate, not financial advice; confirm your numbers with a licensed agent or planner.
Frequently Asked Questions
How much life insurance do I need?+
Replace 10-15x annual income as a shortcut, or use the bucket method: (income × support years × 0.7) + debts + education + final expenses, minus existing coverage. The bucket method is more accurate because it reflects your actual obligations.
What is the income replacement method?+
It sizes coverage so your family can replace your income for the years it is needed — typically until the youngest child finishes school. The 70% factor assumes a surviving spouse continues to earn some income.
Should I subtract my existing coverage?+
Yes. Employer life insurance (often 1-2x salary), existing term policies, and liquid assets all reduce the gap. Sizing only the uncovered portion prevents overpaying for coverage you don't need.
What if my gap is zero or negative?+
You may not need additional coverage. Consider a small term policy (e.g., $25,000-$50,000) to cover final expenses, which is inexpensive at younger ages and spares your family out-of-pocket funeral costs.
Should I buy term or whole life for my gap?+
For most families, term life covers the gap far more cheaply — the gap naturally shrinks as the mortgage is paid off and children become independent. Whole life adds cash value at 5-10x the cost and suits permanent needs like estate liquidity.