How Much Life Insurance Do You Really Need? Use the L.I.F.E. Method
Posted in Uncategorized last updated on September 19, 2025
Life insurance is one of the most important financial decisions you can make — but one of the most common questions is: “How much coverage do I actually need?”
The truth is, there’s no one-size-fits-all answer. Every family’s situation is different. But there’s a simple framework that can help you calculate the right amount of protection: the L.I.F.E. acronym.
Let’s break it down:
L – Liabilities
Start by adding up your debts and major financial obligations.
- Mortgage balance
- Car loans
- Credit cards or personal loans
- Any other large debts your family would be responsible for
👉 Your life insurance should at least cover these liabilities so your loved ones aren’t left with the burden.
I – Income Replacement
Think about how much your family relies on your income. If you weren’t here tomorrow, how many years would they need financial support?
- A common rule of thumb is 5–10 years of income replacement
- If you earn $60,000 per year and want to replace that for 7 years, that’s $420,000 of coverage just for this piece
👉 This ensures your family can continue their lifestyle and meet daily living expenses without financial stress.
F – Funeral Expenses
Funeral and final expenses can add up quickly.
- On average, funerals can cost $8,000–$15,000
- Add in medical bills, legal fees, or estate costs, and the number could be higher
👉 Setting aside coverage for these expenses gives your family peace of mind during an already difficult time.
E – Education Expenses
If you have children (or plan to), consider the cost of their education.
- Average cost of college (public, in-state): about $25,000 per year
- Private schools or future inflation may increase this number
👉 Adding education expenses into your calculation ensures your children have the opportunities you envisioned for them.
Putting It All Together
Here’s a simple example:
- Liabilities: $200,000 mortgage + $20,000 car loan = $220,000
- Income Replacement: $60,000/year × 7 years = $420,000
- Funeral Expenses: $15,000
- Education Expenses: 2 kids × $100,000 each = $200,000
✅ Total Recommended Coverage: $855,000
Final Thoughts
The L.I.F.E. method makes it easier to calculate your coverage needs — and more importantly, it ensures your loved ones will be protected from financial hardship.
Life insurance isn’t about the number on the policy. It’s about giving your family security, stability, and peace of mind.
👉 If you’d like help walking through your own L.I.F.E. calculation, reach out today. I’ll work with you to design a plan that protects what matters most.