The short answer
Add up what your family would need if your income stopped — years of income replacement, your mortgage and other debts, future education costs, and final expenses — then subtract savings and any coverage you already have. A common shortcut is 10 to 12 times your annual income, but a needs-based calculation is more accurate for your situation.
Step 1: Add up what would need to be covered
- Income replacement: your yearly take-home pay multiplied by the number of years your family would need it.
- Mortgage or rent: the remaining mortgage balance, or several years of rent.
- Other debts: car loans, credit cards, student loans, personal or business loans.
- Children's costs: childcare and future education goals.
- Final expenses: funeral, burial or cremation, and end-of-life costs.
Step 2: Subtract what's already there
Be cautious about counting work coverage. It is often only one or two times salary, and it usually ends if you leave the job.
- Savings and investments your family could use.
- Existing life insurance, including coverage through work.
- Other income your family would keep, such as a spouse's salary.
A worked example
In this example a $750,000 to $1,000,000 term policy would close most of the gap. Your numbers will differ, and an advisor can help you test different assumptions.
| Item | Amount |
|---|---|
| Income replacement ($60,000 × 10 years) | $600,000 |
| Mortgage balance | $220,000 |
| Car loan and credit cards | $25,000 |
| Education fund for two children | $100,000 |
| Final expenses | $15,000 |
| Total need | $960,000 |
| Minus savings | −$40,000 |
| Minus work coverage (1× salary) | −$60,000 |
| Estimated coverage gap | $860,000 |
Common mistakes
- Only planning for funeral costs instead of the full income gap.
- Relying entirely on employer coverage.
- Forgetting a stay-at-home parent — replacing childcare and household work is expensive.
- Never reviewing coverage after a new child, a new home, or a raise.
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Frequently asked questions
Is 10 times my salary enough life insurance?
It is a reasonable starting point, but it can be too little if you have a large mortgage, several young children, or college goals — and more than needed if you have significant savings and few dependents. A needs-based calculation is more reliable.
Does a stay-at-home parent need life insurance?
Usually yes. If that parent died, the family might need to pay for childcare, transportation, and household help while the working parent keeps earning. Coverage helps fund those costs.
Should I buy coverage for my mortgage separately?
Not necessarily. A single term policy sized to include your mortgage balance usually covers the same need and gives your family flexibility in how the money is used.
This guide is general education, not individual insurance, investment, tax, or legal advice. Product features, availability, and underwriting vary by insurer and state. See our disclosures.