“Get ten times your income” is the rule of thumb you’ll see most often. It’s a useful starting point and a terrible final answer. The right life insurance amount depends on what you actually want the money to do, not what a multiplier says.

Here’s a four-step method that takes about ten minutes and produces a number you can defend.

Step 1: List what would still need to get paid

If your income disappeared tomorrow, what bills, debts, and obligations would still need to be covered?

• Mortgage balance (the payoff amount, not the current monthly).
• Other debts: car loans, credit cards, student loans, business loans you’ve personally guaranteed.
• Final expenses: funeral and burial costs, last medical bills, estate administration. Budget about $15,000–$25,000 unless you have a specific plan.

Add those up. Call it D, for “debts.”

Step 2: Decide on income replacement

Pick a number of years your family would need your income replaced. Common targets:

• Until the kids are independent — usually until the youngest finishes college or trade school.
• Until your spouse can retire — if you’re the higher earner, this often matters more than the kids’ timeline.
• Forever — only relevant for high-net-worth households doing estate planning.

For most families with kids at home, 15–20 years is the realistic answer.

Multiply your after-tax annual income by the number of years. Call that I, for “income.”

Step 3: Add the big future expenses

What lump-sum costs are coming that you’d want funded?

• College or trade school for each child — in-state public is roughly $100,000 for four years today; private is double that.
• A spouse’s career change or going back to school.
• Wedding contributions, if that’s on your list.

Add these up. Call it E, for “expenses.”

Step 4: Subtract what’s already there

You don’t need to insure for assets that already exist. Subtract:

• Existing life insurance (employer-provided, personal policies).
• Liquid savings and brokerage accounts. (Don’t count retirement accounts — those have their own purpose and tax consequences.)
• Anticipated Social Security survivor benefits, if relevant.

Call that subtraction A, for “already there.”

Putting it together

Your life insurance need = D + I + E − A.

For a typical Michigan family with a 35-year-old earning $90,000, a $200,000 mortgage, two young kids, and modest savings, the math usually lands somewhere between $750,000 and $1.25 million in total coverage. That’s a 20- or 30-year term policy that costs — for a healthy non-smoker — between $35 and $60 a month.

Term vs. permanent

Once you know the amount, the next question is term or permanent. For most families, the answer is “term for almost all of it.” Term insurance covers the years when the family’s need is highest — while the mortgage is being paid off and the kids are dependent. After that period the need usually goes way down. Permanent insurance has its uses (estate planning, business succession, special-needs trusts), but it’s the wrong tool for replacing income.

Want to run the math on your situation? Book a free 20-minute call and we’ll walk through it together with no pressure to buy anything.