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Life insurance isn’t a one-size-fits-all kind of purchase. Many experts suggest buying a policy that’s 5 to 10 times your annual income. To get an accurate picture of your own family’s needs, it’s also a good idea to look at your current financial situation, any future sources of income (like Social Security survivor benefits) or future needs your family may have (like daycare or college expenses for your child). Here are some more ideas to help you make your choice.

Future Resources


The more you have in 401(k)s, IRAs and savings accounts (even your emergency fund), the better off your family will be and the less insurance money they’ll need.

Spouse’s income

Most couples combine what they earn to cover their financial needs. Ask yourself:

  • Is one of you the main earner?
  • How much does your spouse’s income contribute to your living costs?
  • Would it be enough to pay for day-to-day and future expenses?

Social Security benefits

The benefits your family could receive might be more than you think. Exactly how much will depend on your earnings and how long you worked. According to the Social Security Administration, you earn credits toward survivor benefits every year. A younger person needs fewer credits for their family to receive benefits than an older person does. You can find information on how the credit system works, who is eligible (and when), verify your earnings and try out a number of their planning calculators.

Future Needs

Income replacement

This is a big one. A simple method of figuring out how much income you’ll need to replace is to multiply your current annual income by the number of years your family would need support. This could be the number of years before your youngest child goes to college. Once you have this number, you’ll need to add some extra cushion to guard against inflation.

Spending habits

It’s also important to see what you spend in a month. You can look at your bank statements or use our budgeting tool to get an idea of where you spend your money.

Outstanding debt

Many people forget about their debt when they’re thinking about life insurance. However, it’s probably one of the most important factors to consider because the average American carries a lot of debt, and someone will have to pay for it. Look at what you owe on student loans, car loans, credit cards and any high-balance debt. And, don’t forget to include the interest.


If you don’t have children, you can skip this one. If you do, this can be a big expense. You’ll want to provide for them while your spouse works, so you’ll need to know how long they’ll need care, what type (full-time or after-school) and monthly costs. Build in a little extra for cost increases.

Education costs

Once your children are grown, you’ll want to make sure their educational expenses are covered. One way to calculate what the cost of tuition will be when your child is ready to enroll is to take the current cost of the school your child may attend and add 5 percent per year.

End-of-life expenses

Estimating funeral, burial and other final expenses that will need to be paid is also an important factor. While prices can vary widely, according to SmartAsset, the average cost for a funeral and burial in the United States is more than $7,000 (but experts suggest budgeting $10,000). At the very least, a life insurance policy should cover these expenses.

Calculating your life insurance needs doesn’t have to be a wild guess. Once you determine how much your family will need, deduct what you expect to have in savings and other income. The difference is what you’ll need to cover with life insurance. If you aren’t sure what insurance costs, whether you’re military or looking for other types of insurance, you can get a quote from Navy Federal Financial Group1 in minutes.


1Nondeposit investment and insurance products are offered through Navy Federal Financial Group, LLC (NFFG) and through its subsidiary, Navy Federal Brokerage Services, LLC (NFBS), a member of FINRA/SIPC and an SEC registered investment advisory firm. Brokerage and advisory products are offered through NFBS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of the credit union, are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal. 1-877-221-8108. Navy Mutual Aid Association, Covr Financial Technologies, LLC / MFG Group, Inc., SBLI, and TruStage Insurance are not owned by Navy Federal Financial Group, LLC or Navy Federal Credit Union. Life insurance coverages are written through non-affiliated insurance companies.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.