How Much Life Insurance Do You Actually Need? (The Answer May Surprise You.)

Is the 300K group coverage at work really enough?

When it comes to figuring out how much life insurance you need--here’s a straightforward breakdown that takes human capital into account—the idea that your earning power has real value, just like any other asset:

Add up your financial responsibilities: Start with living expenses, mortgage, debts, college funds, and the “just-in-case” costs (yes, even funeral expenses).

Factor in your assets: Subtract savings, investments, and any life insurance you already have (leave those penalty-ridden retirement accounts out).

Think about your “human capital”: This means looking at the present value of all the income you’re expected to earn over your working life. Imagine the income you’d bring in each year, adjust it for inflation, and discount it back to today—it’s not magic math, and it gets close.

Use a few quick shortcuts: Multiply your annual income by 10 for a ballpark, or add $100,000 per child for college savings. Or go full acronym and try DIME: Debt, Income, Mortgage, Education.

Or crunch it like a pro: Estimate the lump sum needed to reliably replace your annual income—divide your earnings by 4% or 5% (that’s the safe withdrawal rule).

Stay flexible: Remember, inflation and life changes happen. If “perfect” coverage isn’t affordable, get what you can and upgrade later. My favorite carriers allow transfer of term to a permanent policy without additional underwriting. 😀

Be strategic: Make sure you have a personal life insurance policy, not just the one through your job. Most workplace life insurance isn’t portable—meaning if you leave, your coverage usually doesn’t go with you.

Supercharge your coverage: Opt for a policy with living benefits, so you can access funds in case of chronic or critical illness, and, if you want extra peace of mind (and a nifty savings component), consider cash value growth—these policies can build real value alongside providing protection.

🧐 Example time: Let’s say you’re 39 years old, and your family needs $185,000 per year to keep up their current lifestyle. Your child will need support for the next 15 years (until college graduation), and you want to account for a 3% inflation rate with a 5% investment return. Instead of drowning in year-by-year calculations, you estimate the lump sum needed right now to cover that rising yearly need for 15 years—turns out, you’d need about $2,317,967 in life insurance. That’s the power of factoring in your human capital: one clear target that lets your family breathe easy, even as life (and costs) change.

💛 The point: Insure what you’re truly WORTH—including the value of all those future paychecks—with a policy that actually follows you and grows with you, so your loved ones have financial peace of mind, not financial puzzles.

☕ Take the guesswork out of your coverage. Get real numbers tailored to your life, book a Money Date with me. 

No pressure, just real talk and clarity about what your family truly needs. 👩❤️👩

Inspiration from Nerd Wallet’s May 2025 Article.