The honest answer is that it depends on what would need to be paid for if you were not there, and for how long. Rules of thumb, such as ten times your salary, can be a starting point, but they ignore the details that make the most difference.

Start with what would need to be paid for

A needs analysis adds up the costs your family would face:

  • Debts. The mortgage, car loans and lines of credit you would not want to leave behind.
  • Income. The number of years of your income the household would need while it adjusts. For young children, this is often until they finish school.
  • Childcare and education. Costs that may rise if one parent is no longer there to share the load, and any savings goal for post-secondary education.
  • Final costs. Funeral expenses and any final taxes and estate costs.

Then subtract what you already have

  • Group coverage through work. Useful, but it usually ends when you leave the job, and it is often a multiple of salary rather than a figure tied to your needs.
  • Savings and investments that your family could draw on.
  • Existing personal policies.

The difference between the two totals is the gap that new coverage would need to fill.

Don’t forget the parent at home

A parent who stays at home or works part-time may earn less, but replacing their care can be expensive. Many families are under-insured on that parent.

Term, permanent, or both

For young families, much of the need is temporary. It shrinks as the mortgage falls and the children grow up. Term insurance is designed for needs like this and costs less to start. Permanent insurance suits needs that last for life, such as final taxes or a planned inheritance. Many families use a combination of the two.

Revisit it when life changes

A new child, a new home, a separation or a large change in income all change the answer. A good plan is reviewed, not set once and forgotten.

Insurance products are issued by insurance companies and are subject to underwriting and the terms of each policy. This article is general information, not a recommendation for your situation.