The number the payout has to be.

The facts, in one place.

Six quotable sentences on sizing life insurance.

1. The amount of life insurance a family needs is what the payout has to do: replace an income for the years it is needed, clear the debts, cover the final expenses, and fund what was promised, less the coverage and savings already in place.
2. Replacing the income is the largest piece, and it is a present value: a fund that, invested, pays the income each year, rising with inflation, and is used up at the end of the years. More years or a lower return on the fund make it larger, fast.
3. Example: $100,000 a year for 20 years, rising 3% a year from a fund earning 5%, needs about $1,676,302. Add $250,000 of debt, $15,000 of final expenses, and $100,000 for education, subtract $300,000 of existing coverage and savings, and the new coverage needed is about $1,741,302.
4. The rule of thumb, 10 times income, gives $1,000,000 for the same family. It ignores the debts, the education, and the number of years, and it can land far from the need in either direction.
5. Social Security survivor benefits reduce the need and are not subtracted here. A surviving spouse caring for a young child, and the child, can receive monthly benefits until the child grows up; the survivor tools on this site cover survivors at retirement age.
6. The need is not fixed. It falls as the years shrink, the debts are paid, and savings grow, which is why coverage is reviewed every few years rather than bought once. Whether term or permanent insurance fits the number is a different question, and this tool does not answer it.

By the years of income.

How the need moves with the years the income must last.

How the need is built.

A life insurance payout is a lump sum, and the need is whatever that sum has to do. The largest part is replacing an income for the years it would be needed, and that is a present value: the fund that, invested at a return, pays the income at the start of each year, rising with inflation, and is used up at the end. The tool values it as a growing annuity due. To that it adds the debts to clear, the final expenses, and an education fund, all treated as paid at once, and subtracts the life insurance and savings already in place. What remains is the new coverage the gap calls for; where the coverage in place exceeds the needs, the tool says so and reports the surplus.

The ten-times-income rule of thumb sits beside the result for contrast. It is quick, and it ignores the debts, the education, the years, and what is already there, so it lands far from the need in either direction. Two things the tool leaves out would lower the number: Social Security survivor benefits, which a surviving spouse caring for a young child, and the child, can receive until the child grows up (the survivor tools on this site cover survivors at retirement age), and the surviving spouse's own earnings. Term against permanent coverage is a different question, and the tool does not answer it.

Methodology.

1. Inputs. The yearly income to replace, the years, the yearly rise in the need, the return the payout would earn, the debts, the final expenses, the education fund, the life insurance in place, and the savings available.
2. The income fund. The income times the growing-annuity-due factor: with q the ratio of one plus the growth to one plus the return, the sum of q to the powers zero through the years less one; the years themselves when the two rates are equal.
3. The need. The income fund plus the debts, final expenses, and education, less the coverage and savings in place, never below zero; the surplus where the coverage exceeds the needs.
4. Beside it. Ten times the income; the year-one monthly income the fund pays; the parts drawn as bars.
5. Validation. Equal growth and return giving income times years; a level income for ten years at 5 percent, paid at the start of each year, at 8.10782 times the income, with the need pinned by hand; and a coverage-exceeds-needs case with the surplus. A transcription error fails the build.
6. Not modeled. Social Security survivor benefits, the surviving spouse's earnings, tax on the fund's earnings, a change in the family's spending, the cost of the coverage, and which kind of policy fits. Hypothetical throughout. Educational, not advice.

Revision history.

The assumption tools' history.

September 7, 2026

Added should you buy points (the bought-down loan against the plain one on the same principal and term, so the position is the interest saved less the cost of the points; true break-even as the first month at or above zero beside the simple rule; the horizon verdict; the return the points earn to the horizon as the monthly-compounded rate at which their cost equals the present value of the saving plus the lower balance owed, by bisection; the largest points count that pays off within the horizon; and the seller-paid case set against the same dollars off the price).

September 7, 2026

Added two mortgage assumption tools: refinance break-even (the simple rule, closing costs over the monthly saving, beside the month-by-month count of interest paid on each loan, where total cost is the balance plus the closing costs plus the interest so far, so the new loan's position is the interest saved less the costs; the reset-the-clock effect flagged when a longer term catches up), and 15-year or 30-year mortgage (the same cash on both paths, the 15-year payment invested after the loan is gone against the difference invested for thirty years, compared at year 15, year 30, and a chosen horizon, with the break-even return by bisection).

September 7, 2026

Added three assumption tools: Roth or traditional 401(k) (the same take-home cost grown at one return and taxed at each end, so the answer turns on the two rates; the plan limit from the annual record), pay off the mortgage or invest (two month-by-month paths, the extra to the mortgage and then the freed payment invested, against the extra invested throughout, with the optional interest deduction), and how much life insurance (the present value of the income to replace as a growing annuity, plus debts, final expenses, and education, less existing coverage and savings, beside the ten-times-income rule).

September 6, 2026

Added two assumption tools: sell or keep the house (carrying costs and appreciation against rent and the return on freed equity, with the home-sale exclusion), and the long-term care cost projection (today's rate at care inflation to the start year, summed over the years of care, with the set-aside today).

September 4, 2026

First release of the longevity projection (year-by-year, spending and outside income indexed to inflation, a fixed return on the remainder, with the sustainable-spending solver) and the pension-versus-lump-sum comparison (the lump sum invested and paying the pension, with the break-even return solver).

Canonical address: https://consideratecapital.com/tools/how-much-life-insurance