How Much Coverage Do You Need? A Simple, No-Fluff Formula

You want a number you can trust, not a sales pitch. I’m a licensed life insurance agent, and this guide gives you a clear way to size your coverage in minutes. No scare tactics. No mystery math. Use the formula, plug in your life, and you’ll land on a policy that makes sense and fits your budget.

The formula

Coverage Needed = Income Years + Debts + Kids & Care + Final Costs + Special Goals − Savings − Existing Coverage

Here’s what each part means in plain language.

• Income Years: Money that replaces paychecks so your family can breathe.
  • Quick rule: 10–15× gross income, or 7–10 years of take-home pay if you want a tighter budget lens.
• Debts: Mortgage balance, private student loans, auto loans, credit cards, personal loans.
  • Skip federal student loans that would be forgiven at death.
• Kids & Care: Childcare, activities, and college help.
  • Fast estimate: $50k–$100k per child for college seed money, plus $10k–$20k per year of childcare for the years you’d want covered.
• Final Costs: Funeral and immediate bills.
  • Most families set $15k–$25k here.
• Special Goals: Legacy gifts, business buyout needs, special-needs planning, charity.
• Savings: Cash and investments you would actually use. Keep retirement accounts in the calculation only if your family would tap them.
• Existing Coverage: Employer life insurance and current personal policies that will still be in force.

That’s the whole engine. Now let’s put it to work.

Pick a term that matches real life

Coverage amount is only half the story. The term length should reach the finish lines that matter:

• Years left on the mortgage
• Years until the youngest child finishes school
• Years to a planned retirement or downsizing

A longer term costs more per month, yet it can save you from replacing coverage later at older ages. If your mortgage ends in 27 years, look at 25–30 years, not 20.

Laddering can match life even better: split coverage into two or three terms that expire at different times. Example: $750k for 10 years + $500k for 20 years + $250k for 30 years. Heavy protection early, then it steps down as debts shrink and kids grow up.

Two ways to size your policy

1) Goal-first method

Run the full formula and buy that number.

Example A: Family of four

• Income $110k
• Income Years: 10× = $1,100,000
• Debts: $420k mortgage + $10k auto = $430,000
• Kids & Care: two kids, $75k each for college = $150,000
• Final Costs: $20,000
• Special Goals: $0
• Savings: $60k liquid = −$60,000
• Existing Coverage: $150k work policy = −$150,000

Suggested coverage: $1,100,000 + $430,000 + $150,000 + $20,000 − $60,000 − $150,000 = $1,490,000
Round to $1.5M. Pick 25–30 years to cover the mortgage and the kids’ full dependency window. If the monthly number feels heavy, try a ladder: $1M for 20–25 years + $500k for 30 years.

Example B: Single renter

• Income $70k
• Income Years: 7× = $490,000
• Debts: $15k private student loan with a co-signer = $15,000
• Kids & Care: $0
• Final Costs: $15,000
• Special Goals: gift to parents $25,000
• Savings: $20k liquid = −$20,000
• Existing Coverage: $50k at work = −$50,000

Suggested coverage: $490,000 + $15,000 + $0 + $15,000 + $25,000 − $20,000 − $50,000 = $475,000
Round to $500k for 20–30 years. Clean, simple, portable if you change jobs.

2) Budget-first method

Pick a monthly number you can keep without stress, then buy the most coverage that number will support. A steady policy beats a big one that lapses.

• Tell me your comfort zone per month.
• I’ll show coverage amounts from several carriers at two term lengths, plus a laddered option.
• If yearly pay trims the total, I’ll show that too. Many carriers offer a discount for annual billing.

What moves the price the most

You don’t need perfect health to get strong rates. Carriers reward stability.

• Age: every birthday nudges rates. Sooner is cheaper.
• Build: height/weight charts differ by company.
• Nicotine and vaping: most carriers price vaping like cigarettes. Quit for 12 months and many will consider non-tobacco; 24 months can improve it again.
• Blood pressure and lipids: steady readings, treated or untreated, often land good classes.
• A1C and glucose: good control matters.
• Driving: DUIs and recent violations can push you into a higher class.
• Family history: early coronary disease or cancer in a parent or sibling affects some carriers more than others.
• Hobbies/travel: private aviation, certain climbing styles, long stays abroad—rules vary by company.

This is why a five-minute pre-screen with me pays off. I match your profile to carriers that like it.

Riders worth a look (and how to decide fast)

• Accelerated benefits / living benefits: access part of the death benefit for qualifying chronic, critical, or terminal events. Many policies include a basic version at no extra charge.
• Waiver of premium: if you meet the policy’s disability definition, the insurer pays your premium. Strong pick for single-income homes.
• Child rider: low-cost coverage for kids with conversion options later.
• Return of premium (term): higher price now, base premiums back if you outlive the term. Sometimes the math works. I’ll show both versions side by side.

Ask for rider prices in dollars per month, not buzzwords. If the value isn’t clear, skip it and keep the plan clean.

Common mistakes that shrink protection

• Relying on work coverage only. It follows the job, not your life.
• Picking term length by price alone. Short terms look cheap today, then force an expensive replacement.
• Forgetting the stay-at-home parent. Replacing childcare and household logistics costs real money.
• Ignoring conversion rules on term. A wide conversion window gives flexibility if health changes.
• Underestimating education costs. A modest fund changes everything for a surviving parent.
• Never reviewing. New baby, new home, new job, better health—time for a quick check-in.

A copy-and-paste worksheet

Paste this into your notes and fill it in:

• Annual income: ______
• Years of income to replace: ______
• Income Dollars (income × years): ______
• Mortgage balance: ______
• Other debts to clear: ______
• Kids & Care (college + childcare): ______
• Final Costs: ______
• Special Goals (legacy, business, charity): ______
• Subtotal: ______
• Savings you would actually use: −______
• Existing coverage that will remain: −______
• Coverage Needed: ______

Term length ideas: mortgage ends in ___ years; youngest child is ___; target retirement in ___ years.
Riders to price: living benefits upgrade, waiver of premium, child rider, return of premium.

Send me that worksheet and I’ll turn it into clear quotes from multiple carriers.

Three quick scenarios and the plan that fits

New homeowners, no kids yet

• Income $95k, mortgage $360k, small car loan, $20k in savings.
• Formula lands near $1M.
• Term: 25–30 years to cover the full mortgage window.
• Add a child rider later if needed.

Parents with kids 9 and 6

• Income $140k, mortgage $420k, goal to seed $60k per child for college.
• Formula lands near $1.5M.
• Ladder: $1M for 20–25 years + $500k for 30 years.
• Consider waiver of premium.

Small business owner with an SBA loan

• Personal income $120k, business loan requires coverage, spouse relies on income.
• Formula plus loan terms lands near $2M.
• Term: match loan amortization and family needs.
• Add a separate policy for buy-sell if there’s a partner.

How I make this easy

1. Five-minute pre-screen. Goals, budget, height/weight, meds, nicotine or vaping, driving, and any activities carriers care about.
2. Targeted quotes. Several carriers that like your profile. Same specs, no cherry-picking.
3. Clear choices. Two term lengths, a ladder option, rider prices in dollars, monthly vs annual payment math.
4. Simple e-app. If a brief exam trims real dollars, I set it up at home or work.
5. Follow-through and service. You get updates during underwriting, beneficiary help after issue, and quick reviews when life shifts.

You’ll always know what you’re buying, why the price looks the way it does, and how to keep the policy in great shape.

Ready to get your number?

Send your worksheet, your state, and a monthly budget target. I’ll reply with real quotes, a side-by-side of term lengths, and a short summary you can share with your partner. Friendly, direct, and built around your life.