How Much Life Insurance Do You Need? (Income × 10, Adjusted)
Life insurance has one job: replace your income for the people who depend on it if you die during your working years. That framing answers most questions immediately — including the first one.
Start here: do you need it at all?
No spouse, kids, or anyone else relying on your paycheck? You likely don't need life insurance at all. Skip it guilt-free and revisit when that changes. (Employer coverage you get for free is fine — just don't pay for more without a dependent.)
The sizing formula
A solid working baseline:
Coverage ≈ (annual income × 10) + debts and mortgage − liquid assets − existing coverage
- Income × 10 approximates replacing your paycheck long enough for a family to adapt — invested at a modest return it funds well over a decade. Young kids or a single earner? Use 12–15×. Older kids, working spouse, or near-FI? 6–8× may do.
- Add debts — the mortgage and other balances shouldn't land on the survivors.
- Subtract liquid assets — your emergency fund and taxable investments already do part of the job. This is why coverage needs shrink as your FIRE progress grows.
Notice the endgame: once your portfolio can support your household without your income — financial independence — the formula goes to zero. FI is self-insurance.
Term vs. whole life: buy term
For income replacement, level term is the right product for almost everyone: a fixed premium for 20 or 30 years covering exactly the window when someone depends on your paycheck. It's cheap because it's pure insurance — a healthy 35-year-old can typically cover $1M for a few hundred dollars a year.
Whole life bundles insurance with a low-return savings account, costs roughly 10× more per dollar of coverage, and pays commissions that explain why it's pitched so hard. The standard playbook — buy term and invest the difference — wins for nearly everyone; the exceptions (estate-tax planning, special-needs dependents) know who they are and should get specialist advice.
Practical notes
- Pick the term to outlast the dependency: until the youngest child is independent or the mortgage is gone.
- Employer group coverage (often 1–2× salary) rarely closes the gap and usually isn't portable — own your policy.
- Both parents need coverage — a stay-at-home parent's work has a real replacement cost.
- While you're at it: name beneficiaries on every account and keep them current. It's free and skips probate.
Find your gap
Tuesday's coverage-gap tool is free: it runs the formula on your real income, debts, and assets, and shows your gap plus a rough term-premium estimate. Check your coverage gap →
Frequently asked questions
- How much life insurance do I need?
- A working baseline is 10× your annual income, plus your debts and mortgage, minus liquid assets and any existing coverage. Adjust the multiple up for young children or a single-earner household, down as your investments grow.
- Is term or whole life insurance better?
- For income replacement, level term is better for almost everyone: it covers the years someone depends on your paycheck at roughly a tenth of whole life’s cost per dollar of coverage. Buy term and invest the difference.
- Do I need life insurance if I have no dependents?
- Generally no. Life insurance exists to replace income for people who rely on it. With no dependents, put the premium toward your emergency fund and investments instead, and revisit if that changes.