Some financial advisors will tell you to multiply your annual income by seven. Others will tell you to buy only enough life insurance to replace the income you are expected to make between now and retirement. Some may recommend that you buy only enough life insurance to cover your present debts. While you can do all of those calculations in a minute, they will only give you an approximate answer. Simply put, calculating your life insurance needs takes homework. It requires you to do an inventory of all of your finances, and to think long and hard about how your beneficiaries would maintain their lifestyles without you. You should also consider inflation and, if you have children, future college education costs. 3 Simple ways to calculate your life insurance needs. No. 1: Multiply your annual salary by six, seven or eight. This is perhaps the easiest way to calculate how much life insurance you should buy. It is appealing because it's so simple, but it overlooks many factors of an individual's circumstances. For instance, if you are single you should have enough insurance to take care of final expenses, eliminate outstanding debt and perhaps make a bequest to a nephew or niece. In this example one or two times annual salary should be enough. No. 2: Calculate your "human life value." This method gives you the income you will earn from your present age until your retirement age, assuming a rate of interest that represents salary increases throughout that period. Again, though it is relatively simple the problem is that it doesn't take into account the specific needs of your beneficiaries - mortgage payments, living expenses, college fund. You also end up calculating a huge amount of life insurance, possibly more than you may need or can afford. No. 3: Cover your debts. This entails buying only enough life insurance to cover debts such as your mortgage, student loans, or outstanding car loans. The difficulty with this method is that it doesn't allow for the ongoing needs of your beneficiaries, such as child care or college fund. | 
