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How Much Life Insurance Do I Need?

Life Insurance
A family relaxes knowing they have enough life insurance

Key Takeaways

  • Determine the amount of life insurance you need based on factors such as family size, employment status, age, business ownership, income, expected final expenses, debt, existing life insurance, assets, and future goals.
  • One rule of thumb suggests your life insurance should be about seven to ten times your annual income, but it may not account for all your financial needs.
  • Calculate the total value of your life insurance needs by considering each factor and subtracting any existing coverage.

If you buy too little, you may not have enough protection for your family and loved ones. If you buy too much, that could mean paying for coverage you don't need.

There's no one-size-fits-all answer. It depends on your unique situation. However, considering these points can help you figure out what size policy to purchase.

What Factors Matter for Life Insurance?

When calculating how much life insurance to purchase, there are several factors that go into the equation. While everyone's situation is different, here are some common aspects to consider.

Family Size

If you have family members depending on your income, you probably need life insurance. The larger the family, the more you may need. This is especially true if you have young children. Also, if you'd like to pay for their college expenses, you may need more life insurance just in case you pass away before completing your children's college fund.

Employment Status

If you're currently employed, you would likely need more life insurance to replace your wages for your family. That said, you could still need life insurance even if you aren't employed. A stay-at-home spouse could still use life insurance to replace the value of the work they do to take care of the house and children. A retiree may also want life insurance to cover their final expenses and leave an inheritance to beneficiaries.


If you're young and single, you'll likely need less coverage than someone who is a bit older and married with kids. On the other hand, it may be helpful to consider how many years of income your life insurance policy will ideally replace based on your age. For example, a 35-year-old who passes away loses out on decades of earnings. Someone older may be closer to their financial goals, such as paying off their mortgage, and therefore potentially need less coverage.

Whether You Own a Business

If you're a business owner, this may impact how much life insurance you purchase. A life insurance policy can help protect your business and your employees in the event that you die.

Key person insurance is designed to help businesses after the owner or other essential employee dies. With this type of insurance, your business would purchase this insurance and then make itself the beneficiary.


The higher your income, the more you may need in life insurance because it would take more to replace what you bring in each month.

Expected Final Expenses

You could also owe for final medical expenses and the court fees of processing your will, known as probate. You may want enough life insurance to help cover all these costs, so they don't fall on your beneficiaries. The national median cost for a funeral (with burial) is $8,000.1


If you have any outstanding debt, such as a mortgage, home equity loans, auto loans or credit cards, your loved ones could use life insurance to help pay it off. Keep in mind that the more you owe, the more life insurance you could need.

Existing Life Insurance and Assets

Life insurance is one way to help cover your financial goals, but it's not the only way. If you have significant cash and other liquid assets, you could potentially get by with less life insurance. If you already have existing life insurance coverage, such as from work, then you may not need to buy as much for yourself. Keep in mind that you might not have as much coverage through work as needed and it typically will not stay in force if you leave your job.

Future Goals

It's possible that your life insurance needs are not that great right now. That could that change in the future, especially if you expect to get married or have kids. Accordingly, you may want to consider purchasing life insurance when you are as young and healthy as possible, as this makes it easier to qualify for a better rate.

How Much Life Insurance Do You Need?

With those factors in mind, you can start envisioning how much life insurance you may need. The next step is deciding on a number. Your life insurance should be about seven to 10 times your annual income.2

If you are hoping to reach many of the financial goals listed above, chances are you may want to aim for the high side — 10 years of income, or possibly more. If you don't have many other factors to consider and provide for, you could possibly get by with less. However, while this rule of thumb gives you a quick estimate, it doesn't take into account all parts of your financial plan.

Another option is to add up the value of your life insurance needs. You can do this by reviewing your list of factors and figuring out how much you want to set aside for each one. For example, someone might decide they need $400,000 to replace their income, $200,000 for their debt and $30,000 for final expenses, and they currently have $100,000 in life insurance from work. In this scenario, the person would need $530,000 in additional coverage ($400,000 + $200,000 + $30,000 - $100,000). To help with this calculation for your own situation, you can use this free life insurance calculator .

How Do You Set Up Life Insurance?

Once you know the amount of life insurance you're interested in purchasing, you could request a free quote online and get an estimate of how much the coverage would cost.

Alternately, you could schedule a meeting with a financial representative. These knowledgeable professionals can help you go over the numbers and double check your needs. In addition, they can explain your options for different types of life insurance products.

Knowing how much life insurance to have is an important part of your financial plan. By carefully going through this process and considering your personal goals, you can determine the correct amount.


  1. 2021 NFDA general price list study shows funeral costs not rising as fast as rate of inflation. 2021 NFDA General Price List Study Shows Funeral Costs Not Rising as Fast as Rate of Inflation.
  2. How big should my life insurance policy be? https://money.cnn.com/retirement/guide/insurance_life.moneymag/index11.htm.

Next Steps

Learn about different types of life insurance
Request your life insurance quote

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Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.