How much life insurance do I actually need?
Generic rules like “ten times your salary” usually miss. This is the calculation I walk through with clients, step by step.
The right question is not “how much life insurance should I have?” but “how much money would my family need in order not to change their life if I stop generating income?”. That reframing changes the whole calculation.
Why generic rules fail
You have probably heard “insure yourself for ten times your annual salary”. That is a starting point, not an answer. Two people on the same salary can need radically different amounts: one with a mortgage and three young children, another single and debt-free. Salary describes your income, not the obligations that depend on it.
The calculation in four parts
Add these four components and you will have a defensible figure:
- Debts to clear: mortgage balance, personal loans, card balances. This frees your family from immediate fixed payments.
- Income replacement: your monthly contribution to the household multiplied by the months you want to cover. With young children, think in terms of the years left until they are independent.
- Education: estimated school and university cost per child, in today’s money.
- Final expenses and buffer: funeral costs, taxes and probate, plus six to twelve months of household expenses so nobody has to make rushed decisions.
From that total, subtract the liquid assets your family could use immediately: savings, accessible investments, and any group life coverage you already have through work. The difference is your real coverage gap.
The mistake of insuring only the higher earner
In couples where one person generates the income and the other holds together the household logistics and childcare, it is common to insure only the first. But if the caregiver is gone, someone has to pay for that work: daycare, transport, domestic help. That cost is real and it deserves coverage too.
About the term
The need for coverage is not constant: it is high while you have young children and a mortgage, and low once the children are independent and the house is paid off. That is why a term structure aligned to that curve is often the better fit, rather than permanent coverage for an amount you will not need for life.
If you like, we can run this calculation together with your real numbers. It takes about twenty minutes and you leave with a concrete figure.
Questions about your specific situation?
Every case is different. Message me and we will review it together, at no cost.
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