Needs Approach

So...you decided you want life insurance, maybe because you want your spouse or disabled family member who depends on you financially to be taken care of if and when you die. A chipper topic.

The needs approach to calculating how much life insurance you need is the intuitive approach. It calculates how much life insurance you need to cover whoever you want to cover (one person? two people?) based on current expenses and estimated future expenses, which includes future living expenses as well as all the wrapping-up-your-death costs (estate settlement costs, burial costs, taxes, medical bills...all that fun stuff).

Were you covering only your spouse, you’d calculate all your one-time death expenses, plus how much money your spouse would need to live every year until you think they’d die, which you have to estimate based on their age and family history. If you were covering your three kids until they turned 18, then you’d want to calculate all the costs you expect they’d need to pay between now and age 18 for each of them, and add all that together, on top of your one-time death expenses.

The "what you need, no more, no less" kind of approach.