How much life insurance does your family actually need to replace your income?

Most families buy life insurance with a vague sense that they need some coverage, then pick a number that feels large enough. That instinct is better than nothing, but it often produces a policy that falls well short of what survivors actually need. Getting income replacement right requires working through a few concrete numbers—not guessing.

Why income replacement is the core calculation

When a primary earner dies, the household loses more than a paycheck. It loses years or decades of future earnings that fund mortgage payments, childcare, education, groceries, utilities, and retirement savings. Life insurance steps in to replace that stream of income so surviving family members are not forced into immediate financial distress. A policy that replaces too little leaves your family making painful choices. A policy sized correctly buys them time, stability, and options.

How to estimate a replacement number

The most common rule of thumb is ten times your annual income. That is a reasonable starting point, but it ignores your specific situation. A more accurate approach accounts for:

• Years until your youngest child is financially independent: More years means a larger gap to fill.
• Outstanding mortgage balance: Many families want the home paid off if the primary earner dies.
• Existing savings and assets: These can reduce the amount of insurance needed.
• A surviving spouse's earning capacity: If your partner earns little or nothing, the gap is larger.
• Future obligations like college tuition: These should be funded separately within the coverage amount.

A common method is to multiply your annual income by the number of years until your youngest child reaches 18 or 22, then add your mortgage balance and subtract liquid assets. The result gives a rough but grounded target.

Term vs. permanent coverage for income replacement

For pure income replacement, term life insurance is usually the right tool. A 20- or 30-year level term policy can cover the years when your income is most critical—while children are young and the mortgage is large. Premiums are low relative to coverage amounts, and you are not paying for features you do not need. Permanent policies carry higher premiums and are better suited to estate planning or permanent obligations, not temporary income replacement needs.

What Truscott recommends

Choosing a coverage amount without doing the math is one of the most common and costly life insurance mistakes families make. A Truscott coverage review walks you through your household's specific income, obligations, and timeline to produce a figure you can actually defend—not just a round number that feels safe. Reach out to schedule your review before your family's coverage gap gets any larger.