How Much Life Insurance Do You Need?
Assumptions on sliders · method reviewed September 7, 2026
Sizes the life insurance a family would need from its parts: the income to replace, the debts, the final expenses, the education fund, and what is already in place. AboutLess
In plain words. Life insurance pays a lump sum. The question is what that sum has to do. This tool values the income your family would need for a chosen number of years as a fund that pays it out, rising each year and earning a return in the meantime. It adds the debts to clear, the final expenses, and an education fund, then subtracts the coverage and savings already there. The result is the new coverage the gap calls for, shown beside the ten-times-income rule of thumb.
Why it matters. Too little coverage leaves a family short in the worst year of their lives; too much costs premiums for decades. The need has parts, and seeing them lets the years, the debts, and what is already in place be argued one at a time.
An example. $100,000 a year for 20 years, rising 3% a year from a fund earning 5%, plus $250,000 of debt, $15,000 of final expenses, and $100,000 for education, less $200,000 of existing coverage and $100,000 of savings: about $1,741,302 of new coverage, against $1,000,000 from the rule of thumb.
Where it stops. Every input is an assumption, and the years and the return on the fund decide most of it. Social Security survivor benefits would reduce the need and are not subtracted. The tool does not model a surviving spouse's own earnings, tax on the fund, or which kind of policy fits, which is a question for an insurance professional. Everything it leaves out.
What they would need each year without you. Take-home pay is the fairer figure, since the payout is not taxed.
Until the youngest child is independent, or until your spouse would retire.
Usually inflation.
While it is being drawn down. A cautious figure, since the money must be there every year.
The mortgage, car loans, and cards, if you would want them cleared.
The funeral and the last bills.
Group coverage at work plus any policy you own.
Cash and investments your family could use. Retirement accounts count, at a discount for the tax.
- Fund that replaces the income
- $1,676,302
- Invested at 5%, it pays the income for 20 years and is then used up
- 10 times income, the rule of thumb
- $1,000,000
- For contrast. It ignores the debts, the education fund, the years, and what is already in place
- Total the payout must cover
- $2,041,302
- The income fund plus the debts, final expenses, and education, before what is in place
The income fund is the largest part and the most sensitive. Add years, or lower the return the payout would earn, and it grows fast. Social Security survivor benefits are not subtracted here and would reduce the need. A surviving spouse caring for a young child, and the child, can receive monthly benefits until the child grows up, and the survivor tools on this site cover survivors at retirement age. The need also falls over time, as the years shrink, the debts are paid, and savings grow, which is why coverage is reviewed every few years rather than bought once.
This is an assumption tool, and every input is yours to set. It values the income as a fund paid out at the start of each year, rising at the rate you set and earning the return you set, and treats the debts, final expenses, and education as paid at once. It leaves out Social Security survivor benefits, income tax on the fund's earnings, a surviving spouse's own earnings, and whether term or permanent insurance fits the number, which is a different question. Method reviewed September 7, 2026. Hypothetical; educational, not advice.
This is a simplified model, not your actual tax return or plan. It only knows what you type in, leaves out rules that may apply to you, and cannot weigh the other facts and trade-offs a real decision depends on. Before you act, talk with a professional who knows your whole situation.
Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.