How Much Life Insurance Do I Need?

Scott McEachern |

Let’s be honest – insurance is not always a fun topic to think about or discuss. But before closing this window and going back to Reddit or Facebook, hear me out. Even if it’s not fun, the insurance discussion is an important one to have, especially if you have someone that relies on your income.

How do I make this conversation a little more entertaining? Before doing any calculations, I ask couples “How much life insurance do you think you need?” I then turn the conversation into a friendly “Price is Right” type bet, where the closest guess without going over wins and the loser has to do dishes tonight!


**SPOILER ALERT** If you keep reading this post, you’ll win the above bet…no dishes for you tonight!!


How Much Life Insurance Do I Need?

I really enjoy having this conversation with couples. For some, this exercise is a complete eye-opener. There is a very good chance you are worth much more than you thought you were. I break this discussion down into 5 manageable sections.

1.       Immediate Money Fund

small family_0.pngUpon your death, how much money would be needed to cover burial expenses, lawyer fees, taxes, and medical expenses? Depending on your final wishes (burial vs cremation) and final expenses, this number can range from $5,000 to $25,000+.

2.       Debt Liquidation Fund

How much money is needed to eliminate debts such as school loans, car loans, lines of credit, credit cards, etc? (not including your mortgage)

3.       Mortgage Elimination Fund

If you were to pass away, would you want your entire mortgage paid off so your spouse won’t have a mortgage payment? If yes, include that here. If no, lean over and let your spouse give your ear a little twist, then fill it in anyway.

4.       Child/Home Care Fund

This is the section that many forget to consider, and yet It is often the largest fund that would need to be created in the event of a premature death. This fund would be used to pay for someone to perform the duties you did on a cost-free basis. For example, if you are stay at home mom, then dad would have to start paying for daycare. We all know day care costs can range from $35-$75 a day! In this section we should also include income replacement. If you pass away, you can no longer provide an income for your family. Depending on your unique circumstance, anywhere from 3 years to 10 years of income replacement may be desired.

5.       Education Fund

Do you want to set aside money for the purpose funding your children’s higher education? Most families do not consider this question when initially thinking about life insurance.


Once you got numbers for these 5 answers, you can add them all up. It might be a big, unexpected number, but we still have to factor in how much capital would be available if you passed away. So don’t forget to subtract your current life insurance coverage, any group insurance you have, your assets (money in the bank) and savings to get a final number.

This number is how much insurance you need.

Don’t leave your family unprotected.

Give us a call for quote today (705) 733 9385.