You can estimate your life insurance need with a simple formula, or you can use an online calculator that walks you through the numbers step by step. Both approaches use your income, debts, future expenses, and existing assets to find the “gap” insurance should cover.
Quick rule of thumb
A common shortcut is to target life insurance equal to about 10–15 times your annual income if you have dependents. For example, if you earn 60,000 a year, you might start by looking at 600,000–900,000 of coverage, then adjust for debts, savings, and kids’ college needs.
Simple manual formula
A widely used approach is: Financial obligations − Liquid assets = Needed life insurance.
Include in “obligations”:
- Years of income you want to replace (salary × years).
- Mortgage balance and other debts.
- Future needs like college costs and funeral expenses.
Then subtract savings, non-retirement investments, existing life insurance, and other money your family can access quickly.
Online calculators to use
If you prefer a guided tool, several major sites offer free calculators:
- NerdWallet life insurance calculator (lets you plug in income, debts, assets, and goals).
- Progressive life insurance calculator (focuses on obligations minus assets, similar to the formula above).
- MoneyGeek life insurance calculator (steps through personal info, health, and coverage needs to estimate cost).
Most calculators will ask about your age, income, debts, dependents, and existing coverage, then show an estimated coverage amount and sometimes sample premiums.
