How much life insurance do I need to replace my income?
Answer
Income replacement is typically the largest driver of your coverage need. The goal is to provide your surviving family enough capital that, invested conservatively, it generates income equivalent to your salary indefinitely—or at least until your youngest child reaches financial independence.
A common approach multiplies your annual income by 10 to 15. At a 5% safe withdrawal rate, $1 million generates approximately $50,000 annually (illustrative; actual results vary by investment performance and market conditions). If you earn $100,000, a $1–1.5 million policy may be appropriate for pure income replacement.
Adjust for existing assets: subtract your investment portfolio, savings, and existing life insurance from the total need. Add back major future obligations like college tuition or the cost of paying off your mortgage. Your spouse's earning capacity and career trajectory also factor in—a two-income household has less exposure than a single-income family.
Our free coverage calculator walks through each of these variables to generate a personalized estimate.
Key Takeaways
- Multiply annual income by 10–15 as a starting point for income replacement.
- At 5% withdrawal, $1 million generates roughly $50,000 per year (illustrative).
- Subtract existing assets and add future obligations to refine your estimate.
- A licensed agent can model your specific income replacement scenario.
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