Use the following formula to quickly estimate the level of life insurance coverage that you need:
Life Insurance Need =
Dependents x10 + Final Expenses + Debts – Assets
The annual amount necessary to meet the needs of people who financially depend on you. These people are mainly your children, maybe your spouse or other members of your family. Your children will usually reach financial independence around the age of 25.
This factor is an approximation. The number 10 is relatively suitable for most cases, especially if dependents are young children. It should be increased if a longer dependency period can be anticipated, for example, for handicapped dependents or stay-at-home spouses.
Mainly funeral expenses and other expenses to cover at death. The only part of the equation for all, throughout life. 10,000 to 15,000$ should be sufficient.
All your outstanding debts; in theory, this portion is expected to decrease with age.
All your investments and assets; your assets should increase with age.
The level of coverage will differ for each member of the family according to their financial contributions.
Two spouses with similar incomes may do without life insurance or simply be content with more modest coverage.
However, we should not overlook the possibility of simultaneous death of the two spouses which would place the children in a precarious situation. Products that meet these needs already exist on the market like second-to-die policies.