How to think about how much life insurance you need
A practical way to size coverage around the people who depend on you, without relying on a one-size rule of thumb.
By the AllSet team · Updated · 3 min read
Start with the people, not the number
The right amount of coverage is what the people who depend on you would need to stay on their feet. That's different for everyone, which is why rules of thumb can point you in the wrong direction.
Add up what you'd want covered
- Income: how many years of your income would your household need?
- Debts: a mortgage, car loans, credit cards or other balances you wouldn't want to leave behind.
- Future costs: childcare, education or other goals you're planning for.
- Final expenses: funeral costs and any bills that come due right away.
Then subtract what's already there
Count savings you'd want used this way and any coverage you already have. Coverage through an employer often ends when you leave that job, so it's worth knowing how much of your protection depends on where you work.
Then check it against your budget
If the full amount costs more than you can comfortably pay, a smaller policy you can keep is usually better than a larger one you might drop. You can often add coverage later as your situation changes, though pricing and eligibility depend on your age and health at the time.
General information, not advice