But every family’s financial situation is unique. So how do you know how much life insurance you really need? Ask yourself the following key questions:

• What would be your family’s immediate needs? Your loved ones would need to pay for your final expenses like medical bills and funeral costs, as well as the costs of settling your estate. You’ll also want to ensure they’re set up with an emergency fund if you don’t have one in place (a general guideline is three to six months of your family’s total income).
• For how long would they need to replace your income? Allow enough time for your children to grow up and become independent, and your spouse time to build enough wealth for retirement. A 20-year term plan is a good idea for those with young children.
• How much debt do you have? In addition to your mortgage, consider student loans, credit card balances, auto loans, home equity and other personal loans, including those from family and friends.
• What unpaid services do you provide? This is especially important for stay-at-home parents. Consider how much it would cost for childcare and for how long your family would need services. Annual childcare costs average $11,000 for daycare and $35,000 for a nanny, but can vary considerably depending on your location.¹ Don’t forget things like household management, meal planning, and chauffeuring. How much it would cost to pay someone else to do it all?
• Do you have plans to fund higher education? Over the past 20 years, college tuition and fees have grown twice as fast as the consumer price index.² Consider how many children you plan to send to college, what type of schools they might attend, and how long until they’ll matriculate.
• How much would you like to leave for additional savings and retirement? In retirement, your spouse might require 60%-80% of your pre-retirement income. Look at your current assets and determine if you fall short.

There are many factors to consider when evaluating your life insurance needs. Our Life Insurance Needs Calculator, CALC, is designed to cover the key areas without making its completion overly complex and time-consuming. Even if you already have coverage,  it’s a good idea to review your life insurance needs each year to make sure you’re not underinsured.

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¹ “How Much Life Insurance Do You Need?” Ramsey, https://www.ramseysolutions.com/insurance/how-much-life-insurance-do-i-need, July 31, 2024
² “College Tuition Inflation Statistics,” BestColleges.com, https://www.bestcolleges.com/research/college-tuition-inflation-statistics/, June 28, 2024.