This is probably the number one question I get from people when they’re shopping for life insurance. And honestly, it’s a fair question — because most of what you find online either gives you a generic formula that doesn’t account for your actual life, or it’s written by someone trying to sell you the biggest policy possible.
So let me just give you the real answer.
The Short Version
A common starting point is 10 to 12 times your annual income. If you make $60,000 a year, that puts you somewhere in the $600,000 to $720,000 range. But that’s just a starting point — not a rule.
What Actually Drives the Number
Here’s what you should really be thinking about:
Your debts. If you have a mortgage, car loans, credit card debt — all of that needs to be factored in. Your life insurance should at minimum cover what you owe so your family isn’t left holding the bag.
Your income and how long it would be needed. If your spouse works and your kids are almost out of the house, your situation looks very different than a single-income household with a newborn. Think about how many years your income would need to be replaced if something happened to you.
Childcare and education. If you have kids, think about what it would cost to keep things running without you. Childcare alone can run $1,500 to $2,000 a month in California. And if you’re planning to help with college, that’s another number to factor in.
Final expenses. Funerals in California can easily run $10,000 to $15,000. That’s not something you want your family scrambling to cover on top of everything else.
Your existing savings. If you’ve got solid savings or investments, you may not need as much coverage because that money is already there as a cushion.
Term vs. Permanent — Which One?
For most families, term life insurance is the right starting point. You pick a term — usually 20 or 30 years — and you’re covered for that period. It’s affordable, straightforward, and does exactly what most people need it to do.
Permanent life insurance (whole life, universal life) costs more but builds cash value over time and doesn’t expire. It makes sense for some people depending on their financial goals, but it’s not a one-size-fits-all answer.
The honest truth? A lot of people get talked into permanent policies when a simple term policy would have served them better. I’ll always tell you which one actually fits your situation.
A Real Example
Let’s say you’re 35, married, have two kids (ages 4 and 7), make $70,000 a year, and have a mortgage with $280,000 left on it.
A rough estimate might look like this:
- Income replacement (20 years): $70,000 × 20 = $1,400,000
- Mortgage payoff: $280,000
- Kids’ education fund: $100,000
- Final expenses: $15,000
- Total: roughly $1.7 million
That sounds like a big number, but a 20-year term policy for a healthy 35-year-old can cost less than $80 a month. It’s less than most people’s cell phone bill.
Don’t Guess — Just Ask
The formulas are helpful for getting a rough idea, but the best way to figure out the right number is to sit down and go through your actual situation. That’s exactly what I do with every client — we go through the numbers together and find something that makes sense for your family and your budget.
If you’re in the Downey or Los Angeles area and want to talk through your options, give me a call or send me a message. There’s no pressure and no obligation — just a real conversation about what makes sense for you.
Elizabeth Govea — EGP Insurance
📞 (562) 248-6840
✉ [email protected]
CA License #0I03196