Decision Guide · Reviewed 6 September 2026
Life insurance: 10× annual income. Disability: 60–70% of income. Umbrella: $1M+ if you have assets. Health: essential.
Insurance protects against catastrophic risk, not normal expenses. Buy enough to replace income/assets if worst happens. Anything more is waste; anything less is dangerous.
Coverage amounts (guidelines)
| Type | Amount | Reason |
|---|---|---|
| Life insurance (with dependents) | 10× annual income | Replace 10 years of income if you die |
| Life insurance (no dependents) | $250K–$500K | Cover funeral + debt |
| Disability insurance | 60–70% of income | Replace lost income; you live 30–50 more years |
| Umbrella liability | $1M–$2M (if you have $500K+ in assets) | Protect assets from lawsuit |
| Health insurance | Whatever your employer offers (required) | Critical protection; non-negotiable |
When to increase coverage
- Having a child → life insurance to 10× income
- Income rises → increase disability to new level
- Home purchase → umbrella (liability risk increases)
When coverage is likely excessive
- Life insurance > 15× income (diminishing returns)
- Disability > 75% income (reduce incentive to work)
- Umbrella > $2M without major assets
Recommendation: Review coverage annually. Life: 10× income if dependents. Disability: 60% income. Umbrella: $1M+. Don't over-insure (costs money) or under-insure (catastrophic risk).