There are many useful life insurance calculators that can help you to make decisions on how much to purchase, but there is no hard and fast rule. Nonetheless, these calculators can serve as a valuable starting point in your decision. Many factors must go into the calculation, not the least of which is price and affordability. Life insurance premiums are not standardized, and the desired level of coverage must be balanced against the monthly premium. Insurers do commonly have limits as to how much insurance you can purchase, although only the wealthiest individuals will approach the outer reaches of these limits.

The amount does not always have to stay the same, either. A level term policy is a type of term life insurance in which the lump sum amount remains the same throughout the coverage term--although the premium may change from year to year. A decreasing term policy, on the other hand, reduces gradually every year, until it reaches zero. A decreasing term policy is especially appropriate for those who may be paying off a large mortgage.

Although a financial advisor may be useful in helping you determine how much life insurance you need, observing a few simple rules will give you a general idea. The optimal amount of life insurance will be based on your current liabilities, such as a mortgage, and your future potential for earning income. Other things to be taken into account include future needs, such as educational expenses for children, or any major purchases you expect to undertake in the future.

The purpose for the life insurance is also a major consideration. If you are purchasing life insurance to replace your income in order to protect your family in case of your death, the amount will be naturally much greater than if you are purchasing life insurance just to provide for expenses your family will incur just after your death. There are a few simple formulas out there that may provide some usefulness, but should not be used as a hard and fast rule. Some financial analysts recommend multiplying your annual income by seven. This may work as a general guideline, but other factors must be factored in, including existing short- and long-term debts, other existing assets, and how much your family will need to maintain itself in case of your death.