Maria is 35, three months into life with a new baby, and there’s a policy document on the side table she can’t quite parse. A friend who sells insurance set her up with it during the pregnancy, and she signed because signing felt responsible. Now, between feeds, she keeps landing on the same question: is the number on this page actually right — or did she just buy a policy instead of the right policy?
It matters more than it used to. Maria’s income carries the household while her partner is between contracts, there’s a mortgage with twenty-odd years left, and a small person who will depend on this family for two decades. Too little coverage and a worst-case day leaves them exposed. Too much and she’s bleeding premium every month for protection no one needs. The document doesn’t tell her which side of that line she’s on.
Here’s the thing the sales conversation usually skips: there’s no universal “right amount,” but there is a right amount for Maria — and it’s built, not guessed. The math is plainer than it looks. Coverage need equals your debts (the mortgage and anything else that wouldn’t disappear), plus income replacement — the years your family would lean on your paycheque multiplied by what you bring in — plus final costs, plus any big future goal you’d want funded anyway, like a child’s education. Then you subtract what you’ve already got: savings, investments, and any coverage through work. What’s left is the gap a policy is meant to fill.
The shape of the policy follows from that. Most young families don’t need coverage forever — they need it for a window: the stretch when the mortgage is still large and the kids still dependent. That’s exactly what term insurance is for, and it’s a fraction of the cost of permanent coverage, which is built for narrower, longer-horizon estate needs. And the flip side is worth saying plainly: if you have no dependents and no shared debts, the need may be close to zero. Insurance replaces an income someone is counting on. If no one is, you may not need it yet.
For Maria, the fog cleared once she had the four numbers. She added the mortgage and debts, multiplied her income by the years until the baby would be independent, tacked on final costs, and subtracted her savings and the group coverage from her old job. The figure that came out was specific, defensible, and — as it turned out — a fair bit higher than the policy she’d been sold. She wasn’t underinsured because she’d been careless. She was underinsured because nobody had done the arithmetic with her.
Size coverage to what your family would need without your income: clear the mortgage and debts, replace your income for the years they’d depend on it, add final costs and big future goals, then subtract savings and existing coverage. Buy term for that window — it’s cheap and it matches the need. This weekend: add up your debts plus (your income × the years your family would depend on it).
FAQ
How much life insurance do I need?
Enough to clear your debts and replace your income for the years your family depends on it, plus final costs and big future goals, minus what you already have in savings and coverage. The right number is specific to your situation, not a round multiple.
Term or permanent?
Term covers the dependent years — while the mortgage is large and kids are at home — cheaply, which suits most families. Permanent insurance is built for specific, longer-term estate needs and costs much more, so match the type to the job.
Do I need it if I’m single with no dependents?
Often not. Insurance replaces income that someone is relying on, so with no dependents and no shared debts the need is usually small. Revisit it when that changes — a partner, a mortgage, or a child.
How long should the term be?
Long enough to cover the years of dependence — commonly until the mortgage is paid off and the kids are financially independent. Many families choose a term that carries them to roughly that point and reassess if circumstances shift.
Next weekend — once the coverage is right, make sure it lands with the right person: Beneficiary Designations: The 15-Minute Decision People Skip (link goes live Aug 8).