How much life insurance do you need?
How much life insurance you need depends on who relies on your income and what would still have to be paid if you were gone. A common approach adds up the income to replace, the mortgage and other debts, the cost of raising children and paying for their education, and final expenses, then subtracts what you already have. There is no single right number, but there is a right way to get close, and two California rules change what “what you already have” is worth.
Schneiderman Insurance Agency works this number with households and business owners across the Los Angeles area, and this page covers the method and the two adjustments most online calculators miss.
What goes into the estimate?
Income replacement: the earnings your household relies on, for as many years as they would be needed. Debts and mortgage: the balance on the home plus other loans, if the goal is for the family to stay put. Children and education: the cost of raising children to independence and the schooling you intend to pay for. Final expenses: funeral, burial or cremation, and any medical or estate costs. Business obligations: loans you have personally guaranteed, or a share of the business that partners would need to buy from your family. Add those, then subtract savings, existing individual coverage, and the portion of any group coverage that would actually survive.
Why should group life insurance be counted separately?
Because it usually leaves with the job, and the conversion right is narrower than people expect. Employer-provided life insurance is commonly one or two times salary and ends when employment ends. Under Insurance Code section 10209, a California group life policy must let an employee whose coverage ends convert to an individual policy without evidence of insurability. Two conditions apply: the employee must apply within 31 days of termination, and the conversion is into a permanent policy of a kind the insurer customarily issues, not into term. The converted premium is set at the employee’s attained age. So a person laid off at 55 with a health problem can keep coverage, but at a permanent-policy premium at age 55, and only if they act inside a month. A figure that looks adequate while you are employed can fall away in the same month the income does. Treat group coverage as a supplement, and size the individual policy to the need on its own.
The Insurance Code section here is as published by the California Legislative Counsel at the time of writing. It is amended from time to time, and that office publishes the current text.
Which method should I use?
Two are common. An income multiple takes your annual income times a figure such as ten to twelve, and it is a rough starting point. The DIME method adds Debt, Income, Mortgage, and Education, and produces a more tailored figure. Both are starting points, not answers. From either, subtract savings and the coverage that will actually still be there, and the remainder is the gap a new policy has to fill. The number is then converted into a policy type by how long the need lasts, which is what the types compared page is for.
Who needs to work this number?
New parents and growing families deciding on a first policy. Homeowners who want the mortgage covered so the family can stay in the house. Business owners with loans, partners, or a succession plan, for whom key person and buy-sell coverage are separate calculations. Anyone whose group coverage is the only coverage they have.
How do we help you size the coverage?
We sit down with you and work through income replacement, debts, education, and final expenses, and we net out what you already hold with the group conversion rule in view. If you plan to name someone other than your spouse as beneficiary, talk to your attorney before the policy is issued. We then explain which policy types fit the number and the duration and help you request a quote on the fit. The wider picture is on our life insurance page, and term is usually where a first policy starts.
Every household is different, and this page does not replace a review of your own situation. To start, request a quote below or call 818-322-4744.
