How much life insurance do you need?

If you're thinking about purchasing a new life insurance policy, how much insurance you need is, quite literally, the million-dollar question.

Let Insurance.com help you find affordable life insurance now.

 Unfortunately, there may be agents motivated to sell you more coverage than you can afford.

To avoid getting stuck with a policy that’s not right for you, follow these four steps to estimating how much life insurance you should buy.

Life insurance step #1: Consider your income

Estimating your life insurance coverage starts with calculating the cost of replacing your annual salary, according to Marlene Lemire, a financial service professional with Detroit Financial Group in Farmington Hills, Mich.

"That figure is going to depend on your age," says Lemire. "As people age, they usually have higher salaries and they always have fewer years of income to replace."

Lemire urges the following formulas for estimating how much life insurance you may need to replace your current income:

• Ages 20 to 35: multiply your current income by 30
• Ages 36 to 40: multiply your current income by 20
• Ages 41 to 25: multiply your current income by 14
• Ages 46 to 50: multiply your current income by 12
• Ages 51 to 59: multiply your current income by 10
• Ages 60 to 65: multiply your current income by 7
• Ages 66 and older: multiply your current income by 5

"That means that if you were 34 and you make $50,000, you should have about $1.5 million in life insurance for your beneficiaries just to replace your income," she says.

Life insurance step #2: Factor in debts and other expenses

Next, factor in debts like credit card balances, auto and personal loans and mortgages.

"The biggest thing that you need to take into consideration are your survivors’ future expenses," says David Goldfarb, president of DSG Benefits Group, an employee benefits brokerage and consulting firm based in Dallas. "Funding for your children's education, family expenses, the cost of supporting your spouse – those all need to be considered, too."

Once you've calculated how much it will cost to replace your income, start adding in your portion of all of your family's long-term financial obligations including mortgage, college tuition and car payments, credit card bills, child support and spouse support.

If you're a single parent or your household's sole breadwinner, your insurance should cover 100 percent of these expenses. Those who live in dual income households can insure for less.

Life insurance step #3: Weigh end-of-life costs

If you've made it this far, you're almost done. The last thing to add are your final expenses – the cost of burial, end-of-life medical fees and estate-settlement services.

Unfortunately, these can add up fast, leaving a huge fiscal burden for your survivors if your life insurance doesn't cover it. For example, the National Funeral Directors Association reports that the average cost of a funeral – not including cemetery plot, headstone or flowers – is $6,560.

According to the Life and Health Insurance Foundation for Education, a nonprofit insurance education group, you can estimate your final expenses by tacking on $15,000 or 4 percent of your estate – whichever figure is larger – onto your life insurance calculation.

Keep mind that if you pass on an estate worth $5 million or more, your beneficiaries will have to pony up a larger chunk due to higher estate and inheritance taxes.

Life insurance step #4: Do some subtraction

If your figure is reaching gargantuan levels, don't worry – now you get to take out a few things. Subtract out:

• Savings
• Taxable assets
• Capital investments
• Life insurance you already have
• Retirement savings

If you're married and don't have children, you can also calculate your spouse's income replacement and subtract that out.

If you need some help with the math, Insurance.com's Life Insurance Calculator can get you started.

Regardless of what figure pops up, Goldfarb reminds you that it's just an estimate. Consider consulting a financial adviser before buying a policy, especially if you have outstanding circumstances such as abnormally high ongoing medical costs, or aging parents or relatives who depend on you financially.

"For someone who's older and earning more money than the average person, it would probably help to talk to [a financial professional] since life insurance can be used for so many things rather than just a death benefit," Goldfarb says. "How much you'll need really depends on individual circumstance."