How much life insurance do I actually need?

Life insurance exists to replace what your income provides — so the people who depend on you can keep their footing if you're gone. The good news: you don't need a finance degree to get the number roughly right. A few questions get you most of the way there.

Start with a simple formula

A common rule of thumb is 10–12 times your annual income. It's a starting point, not gospel — but it captures the idea that a policy should replace years of earnings, not just cover a funeral.

For a more tailored number, add up what your family would actually need:

• Income replacement: your annual income × the number of years your family would need support.
• Debts: mortgage balance, car loans, credit cards, and any co-signed debt.
• Future costs: childcare, and college if you have kids.
• Final expenses: funeral and any medical bills.
• Minus what you already have: savings and any existing coverage (e.g. through work).

Term vs. whole life — which fits the number?

Most families cover the bulk of that number with term life — it's affordable and lasts for the years you need it most (while you have a mortgage and kids at home). Whole life costs more but lasts your lifetime and builds cash value; it's a fit for specific estate or lifelong-dependent needs.

There's nothing wrong with layering: a large, cheap term policy for the core need, plus a smaller permanent policy if it serves a goal.

Don't over-think the exam

Many people delay because they dread a medical exam. Plenty of carriers now offer simplified or no-exam policies, especially for younger, healthier applicants. The cost of waiting is usually higher than the hassle of applying — premiums rise as you age.