How Long Will My Life Insurance Policy Support My Family?

Life insurance is meant to provide financial security for those you love most, but it’s important to ask yourself: just how long could my family live off of my policy if the unthinkable happens? 

What Can My Family Use Life Insurance to Pay For?

A common misconception around life insurance is that it’s only used to cover end-of-life expenses. While paying for a funeral or other burial arrangements are at the top of the list, life insurance can cover much more.  

The death benefit from a life insurance policy can be used towards a variety of costs, including:

• Covering mortgage
• Paying off debt
• Helping with college tuition
• Providing a down payment on a home
• Replacing lost income
• Other day-to-day costs

When you think about all the different things a life insurance policy should help cover, you might be wondering if you have enough coverage. According to a 2024 LIMRA study, of the 51% of adults who do have life insurance, 22% say that they need even more.  

It’s important not to underestimate your family’s financial needs; doing so could leave them vulnerable to dealing with unexpected financial burden. 

What Does My Family Need My Life Insurance to Pay For?

Now that you know life insurance can pay for a wide range of expenses, let’s reflect on what exactly your family might need help paying for. While every family’s financial situation is unique, some questions to ask yourself include: 

How Much Will My Final Expenses Be? 

The loss of a loved one causes so much emotional, logistical, and financial strife. The days following a death bring about many large and unexpected expenses.  

According to the 2024 Cost of Dying Report, the largest expense for American families was the funeral, which cost an average of $5,666. In total, however, the average family paid $12,616 to handle everything after the loss of a loved one, with just 26% of funding for these costs coming from life insurance payouts.  

Ensuring that any life insurance you have will at least cover your end-of-life expenses can help protect your family from this financial strain and give you peace of mind. 

Is My Family Dependent On My Income? 

With the loss of a loved one comes the loss of income. If you are the primary breadwinner for your family, this can have major ramifications. And even if you are one of two salaries, your household income stream will still be significantly impacted. Bills don’t stop after a loved one has died. However, a life insurance policy can be used to cover basic expenses such as groceries, utilities, or childcare, helping to ease the financial burden. The Cost of Dying Report provides helpful data around the frequency of financial issues after loss: 

• 28% of surviving families were harassed by credit card companies
• 24% had to pay medical debt
• 23% had to pay to take over a mortgage
• 20% of property had a judgment lien
• 12% were forced to sell property

What Other Expenses Would I Be Leaving My Family?

Finally, to have a clearer picture of exactly how long your family could be supported by a life insurance policy, you could anticipate expenses beyond the first six months or year after you’ve passed away.  

There are the more obvious costs such as debt, car payments, house payments, or a mortgage. Then there are more forward-thinking costs to consider. If you have young children now, you might think into the future and the cost of a first car, college tuition, or even a wedding.  

There are a few approaches that can be used to estimate your life insurance needs:

Depending on your family’s financial situation, and your coverage amount, your life insurance policy could help you help them for years to come.

• The Multiple-of-Income Approach: this is the simplest method and has an essential goal of replacing the insured’s salary for a set number of years.
  • If your salary is $100,000 and you want to replace it for four years: $100,000 x 4 years = $400,000 in coverage 
• The DIME Method: this method involves adding up four factors (Debt, Income, Mortgage, Education) to figure out how much coverage is best
• Human Life Value Approach: this approach considers your age, gender, occupation, earnings, and employee benefits. It involves several steps:
  • Estimate your salary earnings, from now until a specific point in the future (typically your planned retirement age), including future wage increases.
  • Subtract your annual taxes and living expenses from the total over this amount of time. 
  • Take the remaining total and select an assumed rate of return; subtract this amount.
  • Add the cost of additional benefits, including health care. These benefits have value and will need to be replaced when you pass away.
• Capital Needs Analysis: this is the most widely used method. It accounts for the need to replace income and specific needs of survivors. It includes:
  • Current and future income of both you and your spouse.
  • Immediate lump-sum needs after death, including end-of-life expenses, debt, and mortgage payments.
  • Future expenses, such as college tuition and weddings.
  • Existing family assets, retirement funds, or insurance polices.

How Long Could My Family Live Off My Life Insurance? 

Again, with every family’s financial situation being unique, it’s hard to say definitively that X amount of life insurance coverage will support your family for Y years. The approaches above can be a helpful start to figure out how much coverage you need. However, we can, look at a theoretical scenario and work backwards to get a better sense of how long a life insurance benefit can last. 

Scenario: Earnest

Earnest wants his life insurance policy to cover his own end-of-life expenses, as well as help provide for his family, at least until his children are through college. And so, he wants to figure out how long his $250,000 life insurance policy would help protect his family, in case he needs more coverage. About Earnest’s situation:

• He has a $250,000 life insurance policy 
• He has a wife and two teenage children.  
• He is the primary breadwinner, with an annual salary of $100,000. His wife’s salary is lower, at $65,000 a year.  
• The family’s average expenses total $101,514 each year.  

Now, let’s use some math to see how long Earnest’s family could live off his policy.

TOTAL LIFE INSURANCE PAYMENT: $250,000

First to consider are Earnest’s end-of-life expenses, which we can estimate at $12,616.

REMAINING BALANCE: $237,384

Additionally, Earnest wants this policy to cover two full years of college for each child. He’s budgeted for in-state public tuition.  

At $10,662 each year for each child… 

$10,662 x 2 children x 2 years = $42,648

REMAINING BALANCE: $194,726

Earnest’s family’s total household income is $165,000.  

Without Earnest’s salary, this drops to $65,000. Their average expenses total $101,517 each year. With Earnest’s salary… 

$65,000 household income – $101,517 = $36,514 in uncovered expenses 

When we divide $194,726 in remaining life insurance payout by these uncovered expenses… 

$194,726 ÷ $36,514 in yearly expenses = 5.33 years

So, after accounting for Earnest’s final expenses and his wishes to help cover his children’s tuition, his remaining life insurance benefit could help cover his family’s expenses for 5.3 years.  

If Earnest had other debt to pay off or wanted to account for rising costs, he might consider increasing his coverage. WAEPA offers current and former Civilian Federal Employees up to $1.5 million in Group Term Life Insurance, which can help secure the financial future for you and your loved ones. 

Getting life insurance is an act of love; it’s a way to show those who matter most that you are committed to showing up, even if you’re gone. While having any life insurance at all is a great start, it’s important to ensure that it’s enough to help get your family through life’s storms. You are irreplaceable to the ones you love, but a life insurance policy can help provide for them, and for longer than you might think. 

To get a sense of how much coverage makes sense for your unique situation, use WAEPA’s coverage calculator > 

Join WAEPA

Founded in 1943, WAEPA provides current and former Civilian Federal Employees with exclusive Group Term Life Insurance and Short-Term Disability Insurance. WAEPA members have access to resources, tailored specifically to the needs of Feds and their families. Today, more than 50,000 Feds and their families choose WAEPA to be there for life’s biggest moments.