Decide who the money is meant to support
List the people or obligations affected by your death. A spouse, child, dependent parent, business partner or co-borrower may have a different type of need. Do not assume every debt transfers to relatives, or that every relative should receive the same amount. Legal responsibility and your personal intention are separate questions.
Next, separate immediate cash needs from continuing support. Funeral expenses and a short transition reserve are different from 15 years of household spending. A beneficiary may need both, but they should not be mixed into one unexplained number.
The NAIC life insurance guidance encourages assessing obligations and resources. A useful estimate makes those assumptions visible so you can update them when life changes.
Calculate the annual support gap
Start with the household's expected spending after your death. Some expenses may fall, while others may rise. A surviving partner may pay less for commuting but more for childcare, household help or health coverage. An unpaid caregiver's contribution can create a substantial replacement cost even without a lost salary.
Subtract income you reasonably expect to continue, using a cautious estimate. Include employment income only at a level the survivor could realistically maintain. Do not assume they could immediately work more hours while also taking on caregiving responsibilities.
For example, a hypothetical household might expect $66,000 in annual essential spending and $30,000 in continuing take-home income. Its annual gap would be $36,000. If that gap lasts 12 years, a simple undiscounted estimate is $432,000. This calculation ignores investment returns, inflation and changes over time; those omissions are reasons to use scenarios, not reasons to pretend the estimate is exact.
Add obligations once
Potential additions include debt you want paid off, education funding, final expenses and an emergency transition reserve. The most common error is double counting housing: adding the full mortgage balance while also including all future mortgage payments in annual support.
Choose one consistent approach. You might calculate support assuming the mortgage remains, or assume the insurance pays it off and reduce future housing spending accordingly. Taxes, insurance, maintenance and utilities can continue even after the loan disappears.
Do not automatically add every dollar of a child's future education cost. Decide what portion you intend to fund and what other resources are already assigned. Similarly, a business obligation may need its own policy ownership and beneficiary arrangement. Ask the relevant professional before folding a business need into a personal family policy.
Subtract usable resources, not everything you own
Accessible savings can reduce the need if you intend survivors to use them. Assets assigned to another purpose, such as an emergency reserve or a surviving spouse's retirement, should not automatically be consumed in the calculation.
A home is valuable, but selling it may conflict with the goal of allowing the family to stay there. Retirement accounts may involve tax, access and long-term planning considerations. Employer life insurance can help, but future availability may depend on employment. See workplace versus individual life insurance before treating it as permanent coverage.
Record resources in two columns: “reliably available” and “uncertain or conditional.” Calculate the estimate both with and without the uncertain column. That makes the cost of relying on those resources clear.
A complete hypothetical worksheet
The following numbers illustrate a method. They are not a recommendation or a quote, and the support figure assumes the separate debt payoff is not also included in ongoing expenses.
| Planning item | Hypothetical amount |
|---|---|
| Annual support gap of $36,000 for 12 years | $432,000 |
| Debt payoff goal | $180,000 |
| Education funding goal | $60,000 |
| Final expenses and transition reserve | $20,000 |
| Total obligations | $692,000 |
| Accessible assets assigned to survivors | Minus $90,000 |
| Existing individual coverage expected to remain | Minus $100,000 |
| Illustrative additional coverage need | $502,000 |
The arithmetic is $432,000 + $180,000 + $60,000 + $20,000 − $90,000 − $100,000 = $502,000. An available policy amount may differ from this estimate. Compare nearby coverage levels and actual premiums rather than assuming $502,000 is the only acceptable result.
Test three scenarios
A lower-need scenario might assume a shorter support period or less education funding. A middle scenario can reflect your most reasonable expectations. A higher-need scenario might allow a survivor to reduce work temporarily or replace more unpaid care.
Do not add arbitrary cushions without explaining what they cover. Naming the reason for a larger number helps you decide whether it is essential or optional. It also makes the conversation with a spouse or adviser more useful than debating a generic salary multiplier.
Inflation and investment returns can materially change a long support calculation. A licensed professional or financial planner can help model them. Avoid assuming a guaranteed return on the eventual death benefit or using aggressive investment growth to justify a smaller amount of essential protection.
Match the time period and budget
A coverage amount without a duration is incomplete. If most of the need lasts 18 years, a shorter policy may leave a gap even if the initial death benefit looks sufficient. If part of the need is lifelong, evaluate that separately rather than automatically extending every obligation forever.
Review term versus whole life after completing the need estimate. Then obtain comparable offers. If the premium exceeds what you can maintain, prioritize the obligations that would create the most serious hardship and discuss alternative amounts or structures. A policy that lapses because the payment is unmanageable does not deliver the intended protection.
Frequently asked questions
Is ten times my salary enough?
It can be a rough starting point, but it ignores household spending, unpaid care, existing assets and the duration of need. Two people earning the same salary can need very different amounts.
Should a stay-at-home parent have coverage?
Consider what it would cost to replace their work and whether the surviving parent would need to reduce paid employment. The absence of a paycheck does not mean the absence of financial impact.
How often should I redo the calculation?
Review it after a major family, employment, debt or asset change. Keep the assumptions with your policy documents and update beneficiary designations separately; a correct coverage amount does not fix an outdated beneficiary.
Sources and methodology
This article uses public policy guidance and official product information, checked October 30, 2026. Insurance coverage and availability depend on the issued contract, state and personal eligibility. We did not apply for coverage, test a carrier or evaluate an actual claim for this article.