Many people know they should have life insurance, but few know how much is enough. The right coverage amount depends on your income, debt, family size, and long-term goals. Whether you’re buying a policy for the first time or re-evaluating an old one, having the right number matters.

This guide breaks down how to determine your ideal coverage—and why the wrong number can leave your family exposed.

Why Life Insurance Matters

Life insurance provides a financial safety net for your loved ones if you pass away unexpectedly. The payout can help:

Replace your income
Cover your mortgage and debts
Fund your children's education
Pay for funeral expenses
Maintain your family’s lifestyle

At its core, life insurance is about protecting the people who rely on you. It offers them financial time and stability during one of the hardest periods of their lives.

What Happens If You’re Underinsured?

A coverage gap could leave your spouse unable to afford the mortgage or force your children to delay college. Even a shortfall of $250,000 can mean long-term consequences like selling the family home, lifestyle changes for your family, dipping into retirement accounts, or accumulating debt.

Many people mistakenly believe their employer policy or small individual plan is “good enough.” In reality, it often isn’t.

How to Estimate Your Need?

Several variables play into estimating the need for life insurance, but it mostly comes back down to why life insurance matters and who you are trying to protect. When analyzing insurance coverage for financial planning clients, we focus on debt, income, future expenses, and retirement benefits (i.e. a future pension).

Let’s consider a typical family of four with the following assumptions.

Husband – Age 45 with Income of $75,000
Wife – Age 43 with Income of $150,000
2 Children – Age 3 and 7
Mortgage - $350,000
Husband Pension – $225,000 (Lump Sum Present Value of Future Payments)

As you can see in the examples, the amounts for the husband and wife are different. A lot of families will just obtain the same coverage for each spouse, when the need is often not the same. We strongly recommend working with a financial professional as there are several other factors that could come into play. For example, younger couples with children may want more than 5 years of income replacement because they’ve had less time to grow their other assets. Some folks may sleep better at night with a larger amount.

Term vs. Permanent: What’s the Difference?

Term Life Insurance

Covers you for a set period (10, 20, or 30 years)
Ideal for covering temporary obligations like a mortgage or child-rearing years
Lower monthly cost

Permanent Life Insurance

Covers you for life
Includes a cash value component
Used more often in estate planning or legacy strategies
Higher cost, more complex

What Type of Insurance Should I Get?

For most people in their working years, term coverage offers the most protection for the lowest cost. This is typically what we recommend to families to make sure the amount of coverage is sufficient to cover the need. Over time, most families will continue to accumulate assets, pay down their mortgage, and see the kids grow up and come off the family payroll. This means that the amount of insurance coverage recommended today could be very different 10-15 years from now.

Term policies are a cost-effective way to cover the need while it is there. The annual savings from obtaining a term policy over a permanent policy could also be used to execute other financial strategies that may help in the near and long term.

Another cost saving strategy could be to ladder insurance policies over different periods. In general, the shorter the term period, the lower cost the policy. If the need for insurance is greater for the next 10 years, obtaining a 10-year policy for part of the need and then a 20- or 30-year policy for the remainder could lower the overall cost.

When Should You Review Your Coverage?

It’s smart to review your life insurance every few years or whenever your life changes. Key moments include:

Getting married or divorced
Buying a home
Having or adopting a child
Significant changes to income or debt
Changes to a beneficiary’s needs

These events can shift the amount of coverage you need or how long you need it.

Final Thoughts

Life insurance is not just about numbers—it’s about protecting your family’s future. Whether you need $500,000 or $2 million in coverage depends on your unique circumstances.

Having the wrong amount can leave loved ones exposed. Too little could cause hardship. Too much might waste dollars better used elsewhere.

If you’re unsure how much coverage is right for you, this is a perfect time to consult with a financial advisor who can walk you through the math and build a plan that gives you peace of mind.