How Much Life Insurance Should You Get? Here’s a Simple Way to Find Out.
One of the most common questions I get, from entrepreneurs, professionals, and families, is:
“How much life insurance should I get?”
Most people either guess, choose a round number, or just do whatever their friend or coworker did.
However, there are actually two clear, practical ways to determine this, one based on what the insurance company will provide, and one based on what you want the policy to do for your family.
Let’s walk through both.
Approach 1: Your Economic Life Value (What You Qualify For)
This is the simplest method, and it’s the standard used in life insurance underwriting.
It’s called your Economic Life Value or Income Replacement calculation.
Here’s how it works:
Coverage Sliding Scale
Ages 18–40 → 30× gross income
Ages 41–45 → 25× gross income
Ages 46–55 → 20× gross income
Ages 56–60 → 15× gross income
Ages 61–70 → 10× gross income
So if you're 45 years old, making $500,000 a year:
$500,000 × 25 = $12,500,000
That’s the amount the insurance company will approve for you as income replacement for your family.
Why? Because it reflects the economic value your life represents based on your current earning power.
This approach answers the question: “What would my income have produced for my family if I were still here?”
But this is only one way to determine coverage.
Approach 2: What You Want the Insurance to Accomplish
This second method is about addressing the desires you want the life insurance to do for your family.
You answer a few questions:
1. Do you want the mortgage paid off?
Let’s say your remaining balance is $400,000.
2. Do you want to fund college for your kids?
Maybe you want to fully cover it.
Today, that might be roughly:
$100,000/year
× 4 years
× 2 kids
= $800,000
3. How much income do you want replaced and for how long?
Let’s say you want to replace $200,000 per year of your current income for 20 years.
But you realize that $200,000 of income today won't spend like that for 20 years, so we decide to grow that income at 3% inflation.
With life insurance, we can have it pay out as a lump sum. If we invested that lump sum, what rate of return could you expect to return that income for 20 years for your family? Let’s say you chose 6%.
That tells us that we would need $3,087,045 of death benefit to pay out and be invested to produce that same income.
Putting It All Together
Here’s what the intentional plan looks like:
$400,000 (mortgage)
$800,000 (college)
$$3,087,045 (income replacement)
Total = $4,287,045
So now you have two numbers:
$12,500,000 (what the insurance company says you’re entitled to)
$4,287,045 (what you want based on your goals)
Both numbers serve a purpose.
And here’s the key mindset shift:
You don’t choose life insurance based on a guess.
You choose it based on a framework.
Which Approach Is “Right”?
It depends.
Some people look at their Economic Life Value and realize,
“You know what? That’s exactly what I want. ”
Others look at their intentional planning number and feel,
“That’s enough for my family.”
There’s no wrong answer.
The power is in knowing why you chose the number you did.
Final Thought: Life Insurance Shouldn’t Be Arbitrary
Your life insurance decision deserves more than a ballpark guess.
Whether you base it on your economic value or the specific outcomes you want for your family, both approaches help you create a plan that’s intentional, not emotional, not rushed, and not random.
If you want help running your own numbers and building a strategy that actually fits your life, book a Clarity Call. Let’s map out what the right amount of coverage looks like for your situation.
