How much life insurance do I actually need?

Add the years of income you want replaced multiplied by that annual amount, plus debts you want cleared, plus any education fund, plus final expenses, then subtract savings and existing cover. A parent replacing 55,000 for ten years with 180,000 in debts and 60,000 for education, minus 30,000 in savings, needs about 770,000 — a figure that a flat ten-times-salary rule would have understated.

Is the 10-times-salary rule accurate?

It is a rough average, not a personal number. Households with young children and a long income-replacement horizon regularly need 15 to 20 times salary once education and debt are added, while households near retirement with little debt can need under 5 times.

Should I count my employer's group life policy?

Only as an offset, not as the foundation. Group cover typically runs one to two times salary and disappears if you leave the job, so most of the calculated gap should be filled with a portable individual policy.

Does Social Security replace the need for life insurance?

It covers part of the gap for parents of dependent children, since survivor benefits from the Social Security Administration continue until a child turns 18, but the benefit is tied to the deceased worker's earnings record and stops well before most education or long-term income goals are met.

How often should I recalculate my cover amount?

Re-run the numbers every three to five years and after any major change: a new mortgage, another child, a paid-off debt or a significant jump in savings. Term policies are usually bought to match a specific horizon, so the amount that made sense at 30 is often too much or too little by 45.

Why does the calculator round the policy size up?

Insurers sell coverage in bands rather than to the dollar, so a calculated gap of 358,000 is quoted as a 400,000 policy in practice. Rounding up in the tool mirrors how the policy will actually be priced and issued.

Life insurance needs calculator

This calculator adds up what your household would need a payout to cover — years of replaced income, outstanding debts, an education fund and final expenses — then subtracts savings and any cover you already hold. The result is the size of the gap a new policy should close, not a guess pulled from a rule of thumb like ten times salary.

Reading the cover-needed figure against a benchmark

Financial planners have long used income multiples as a shortcut, typically somewhere between 7 and 12 times annual salary for a household with dependants and a mortgage. That shortcut is a starting point, not a substitute for adding up the actual obligations, because two households on the same salary can have wildly different debts, ages of children and existing assets.

A single parent with a young child and fifteen years of replacement needed will usually land well above a ten-times multiple once education and remaining debt are folded in. A couple close to paying off the mortgage with grown children and a decent emergency fund can land under five times, because so much of the obligation side has already shrunk.

The 'rounded policy size' line matters in practice: insurers sell coverage in round bands, so a need of 361,400 effectively becomes a 400,000 policy once you round up, and it is worth asking for a quote at that round figure rather than the exact gap.

Three households, three different gaps

A parent earning 55,000 wants ten years of income replaced while their children finish school, carries 180,000 in debts including the mortgage, wants 60,000 set aside for education, budgets 10,000 for final expenses, and holds 30,000 in savings. The gap is 55,000 times 10, plus 180,000, plus 60,000, plus 10,000, minus 30,000, which comes to 770,000 — a 14.0 times multiple, well above the generic rule because the education line is doing real work.

A dual-income household earning 90,000 from the insured partner wants twenty years covered, has 250,000 in debts, wants 100,000 for two children's education, allows 15,000 for final costs and has 75,000 already set aside. That totals 2,090,000, or roughly 23.2 times income, because a 20-year replacement horizon compounds quickly even before debts are added.

A younger earner on 40,000 with no children, 50,000 in remaining debt, no education fund, 8,000 for final expenses and 20,000 in savings needs only 358,000 of new cover, about 9.0 times income. The absence of an education line and a shorter eight-year horizon keep the total far lower than the household above despite a similar debt figure.

Where a simple sum understates or overstates the need

The formula treats the payout as sitting in cash and being drawn down without earning a return, which is deliberately conservative — if the beneficiary invests the lump sum, a smaller policy can fund the same number of years, but relying on investment performance to stretch a payout is a risk most households would rather not carry.

It also assumes the need is static, when in reality it shrinks as debts are paid off, children finish school and savings grow, and it can spike suddenly with a new mortgage or another child. Needs are usually reviewed every three to five years or after a major life event, not set once and left alone.

The calculation ignores taxes and fees that can apply to certain payout structures, ignores inflation eroding a fixed income-replacement figure over a long horizon, and does not account for a policy paying out in instalments rather than as a lump sum, which changes how quickly the family can access the money.

Employer cover, survivor benefits and timing

Group life insurance through an employer is usually one to two times salary and ends when employment ends, so it should be treated as a supplement rather than the core of the plan, especially for anyone who might change jobs before dependants are grown.

In the United States, Social Security survivor benefits can replace part of a working parent's income for dependent children, but the amount depends on the deceased worker's earnings record and stops when the youngest child turns 18, so it reduces but rarely eliminates the gap this calculator measures.

Term life premiums are priced on age and health at the point of purchase, so buying cover earlier locks in a lower rate for the term, while waiting until health changes or a milestone birthday passes can raise the premium sharply or trigger medical underwriting that a younger applicant would have avoided.

Frequently asked questions

How much life insurance do I actually need?: Add the years of income you want replaced multiplied by that annual amount, plus debts you want cleared, plus any education fund, plus final expenses, then subtract savings and existing cover. A parent replacing 55,000 for ten years with 180,000 in debts and 60,000 for education, minus 30,000 in savings, needs about 770,000 — a figure that a flat ten-times-salary rule would have understated.
Is the 10-times-salary rule accurate?: It is a rough average, not a personal number. Households with young children and a long income-replacement horizon regularly need 15 to 20 times salary once education and debt are added, while households near retirement with little debt can need under 5 times.
Should I count my employer's group life policy?: Only as an offset, not as the foundation. Group cover typically runs one to two times salary and disappears if you leave the job, so most of the calculated gap should be filled with a portable individual policy.
Does Social Security replace the need for life insurance?: It covers part of the gap for parents of dependent children, since survivor benefits from the Social Security Administration continue until a child turns 18, but the benefit is tied to the deceased worker's earnings record and stops well before most education or long-term income goals are met.
How often should I recalculate my cover amount?: Re-run the numbers every three to five years and after any major change: a new mortgage, another child, a paid-off debt or a significant jump in savings. Term policies are usually bought to match a specific horizon, so the amount that made sense at 30 is often too much or too little by 45.
Why does the calculator round the policy size up?: Insurers sell coverage in bands rather than to the dollar, so a calculated gap of 358,000 is quoted as a 400,000 policy in practice. Rounding up in the tool mirrors how the policy will actually be priced and issued.

Sources

Social Security Administration — Survivors Benefits — Describes how survivor benefits for a worker's dependent children are calculated and that they generally end at age 18 (accessed 2025).
National Association of Insurance Commissioners — Life Insurance — State insurance regulators' consumer guidance on how much life insurance coverage to buy and how term policies are priced (current 2025).