How much life insurance do I need?

Almost every conversation about life insurance starts with the wrong question. People ask 'what kind should I buy?' before they ask 'how much do I actually need?' The amount matters more than the product. A $250,000 term policy on a household that needs $1.5 million of coverage is not protection — it is a partial fix that feels like a full one.

There is no universal answer to how much life insurance you need. But there is a real method, and it takes about ten minutes to work through. Here is the plain-language version — without a sales pitch.

The two questions that drive the math

Every honest calculation comes down to two things: what your family loses when you die, and what they already have to fall back on. Coverage is the gap between those two numbers.

Most online calculators skip the second question entirely and recommend a number that is far too high. Most quick rules of thumb ("ten times your salary") skip both questions and happen to be roughly right for some people and wildly wrong for others.

Step 1: Add up what your family loses

Walk through each category below and write down a real number. If you do not know the number, estimate high — it is easier to trim coverage later than to add it.

• Income replacement — your after-tax income, multiplied by the number of years your family would need it. For most households with young children, that is 15 to 25 years.
• Outstanding debts — mortgage balance, car loans, credit cards, personal loans, business debt you have guaranteed personally.
• Future education costs — roughly $25,000 to $35,000 per year per child for in-state public college, double that for private. Multiply by four years.
• Final expenses — funeral, burial or cremation, estate settlement. Budget $15,000 to $25,000.
• Care for dependents — long-term care for a parent, special-needs care for a child, anyone whose support depends on your income or your time.

Step 2: Subtract what your family already has

Now go through what is already in place to offset that need. This is the step most people skip — and the reason they end up over-insured.

• Existing life insurance coverage, including group coverage through work
• Retirement accounts and brokerage assets your surviving spouse could draw on
• Social Security survivor benefits (real, and meaningful for households with minor children)
• Your partner's income, if they work or could return to work
• Equity in your home, if your family would downsize

The number you are left with — needs minus resources — is roughly the coverage you should be carrying right now. Round up to the nearest $100,000.

A worked example

Take a 38-year-old earning $95,000 after tax, married, two kids under 10, $310,000 left on a mortgage, $40,000 in employer-provided group life, $180,000 in a 401(k).

• Income replacement: $95,000 × 20 years = $1,900,000
• Mortgage: $310,000
• Two kids through state college: ~$240,000
• Final expenses: $20,000
• Total need: ~$2,470,000
• Less group life and retirement assets: −$220,000
• Coverage gap: ~$2,250,000

Rounded up, that household should be carrying about $2.5 million of life insurance. A 20-year term policy at that face amount costs a healthy 38-year-old roughly $80 to $130 a month — significantly less than most people guess.

Quick rules of thumb (and when they are wrong)

If you do not have time to work through the full math, these shortcuts get you in the right ballpark:

• 10× your annual income — works if you have one or two kids, average debt, and a working spouse. Too low if you are the sole earner or have a large mortgage.
• 10× income + $100K per child — slightly better. Builds education funding into the number directly.
• DIME method (Debt + Income × years + Mortgage + Education) — closer to the real answer. Still ignores your existing assets, so it tends to over-shoot.

Rules of thumb are a starting point, not a finishing point. Do the real math at least once.

How life stage changes the answer

Your number is not fixed for life. It usually peaks during the years you have young children and a mortgage, then declines as the kids grow up, the mortgage pays down, and your retirement assets grow. By the time you retire, most people need very little life insurance — or none at all.

Re-run the math every three to five years and at every major life event: new child, new home, divorce, business launch, inheritance, retirement.

Once you know the number

Sizing the coverage is half the job. The other half is making sure the coverage you buy is findable when your family needs it. A policy your family cannot locate is a policy that does not pay. Store every policy you own — group, individual, old whole life, everything — in one secure vault, with a trusted contact who can find it without you.

That is exactly what EverKeep is built for. Upload your policies, name a beneficiary or executor as a trusted contact, and your family will never have to spend three months tracking down what you already knew.