Guide
Estimate how much life insurance coverage you need based on income replacement, debts, education costs, and final expenses. Compare term vs whole life to find the right fit.
How Much Coverage Do You Need?
A common formula: 10–12× annual income plus outstanding debts, mortgage balance, and estimated education costs for dependents. Stay-at-home parents need coverage too — childcare and household management have real replacement cost.
Subtract existing savings, employer-provided coverage, and other assets from your gross need to find the gap.
Term vs Whole Life
Term life insurance covers 10–30 years at low cost — ideal for income replacement while children are dependent or a mortgage is outstanding. Whole life builds cash value but costs 5–10× more for the same death benefit.
Most families are best served by affordable term coverage and investing the premium difference in tax-advantaged accounts.
Key Takeaways
- Target 10–12× income plus debts and education costs.
- Term life is sufficient for most families.
- Review coverage after major life events (marriage, children, home purchase).
- Name beneficiaries and keep policies updated.