Life insurance is one of those things most people know they should have but aren’t quite sure how much of. It’s a fair question, and the honest answer is that the right amount looks different for everyone. That said, there are some straightforward ways to get a solid estimate so you’re not guessing or just picking a number that sounds about right.
Start With What Your Family Would Actually Need
The core purpose of life insurance is to replace your income and cover obligations if you’re no longer here. So the starting point is thinking through what your loved ones would need to maintain their lives financially. That typically means looking at a few key areas:
- Income replacement: How many years would your family need financial support, and roughly how much per year?
- Outstanding debts: Mortgage, car loans, student loans, credit cards.
- Future expenses: Think college tuition, childcare, or any large planned costs.
- Final expenses: Funeral and burial costs can add up quickly, often more than families expect.
Add those numbers together, then subtract any savings, investments, or existing coverage you already have. What’s left is a reasonable starting target for your coverage amount.
A Simpler Rule of Thumb (and Its Limits)
You’ve probably heard the advice to buy coverage equal to ten times your annual income. It’s a decent starting point, especially if you’re young and relatively healthy, but it doesn’t tell the whole story. A single person in Salt Lake City with no dependents has very different needs than a Murray parent with three kids, a mortgage, and a spouse who works part-time. The multiplier approach doesn’t account for any of that nuance.
A more complete picture comes from what’s sometimes called the DIME method, which stands for Debt, Income, Mortgage, and Education. You simply add up your total debts, the number of years of income your family would need, your remaining mortgage balance, and estimated education costs for your children. That total gives you a more grounded number than a flat multiplier.
Term vs. Permanent: Does the Type of Policy Affect How Much You Need?
It can, actually. Term life insurance covers you for a set period, say 20 or 30 years, which makes it a practical choice for covering your working years and the time your kids are at home. Many families in Sandy, Riverton, and West Valley City use term policies to cover the years when financial responsibilities are highest.
Whole life and universal life insurance last your entire lifetime and build cash value over time. They tend to come with higher premiums, so some people carry a smaller permanent policy alongside a larger term policy to get the coverage they need now without overextending their budget long-term. There’s no single right answer; it really comes down to your goals, your budget, and where you are in life.
Don’t Forget to Revisit as Life Changes
Whatever amount you land on today probably won’t be the right amount forever. Marriage, having children, buying a home, starting a business, or sending kids off to college all shift the picture. A good habit is to take a quick look at your coverage whenever a major life event happens. We’ve been helping Utah families review and adjust their coverage since 1976, and one of the most common things we see is people who bought a policy years ago and never revisited it. Life moves fast, and your policy should keep up.
As an independent agency, we work with multiple carriers, which means we can shop around on your behalf rather than being tied to a single company’s products. Families and individuals across Salt Lake City, Murray, Sandy, Riverton, West Valley City, and surrounding areas trust us to find coverage that fits both their needs and their budget.
Getting a Little Help Goes a Long Way
Running the numbers on your own is a great first step, and we hope this gives you a clearer framework. But if you’d like a second set of eyes, or if you’re not sure which type of policy makes the most sense for your situation, we’re always happy to talk it through. Give us a call or drop us an email and we’ll help you figure out what coverage actually makes sense for you and your family.
