If you don't buy enough insurance, you risk leaving your dependents financially unprotected. If you buy too much insurance, you're spending money unnecessarily. Basically, you can calculate your insurance needs by deducting your assets from the expenses you anticipate your dependents will have after your death.
Three types of expenses should be considered: final expenses, daily expenses and major expenses. Final expensesinclude funeral expenses, final medical expenses for which you're not insured, and probate expenses. Daily expenses include expenses for housing, food, clothing and child care. Major expensesinclude items such as education and emergencies.
Remember, you're not calculating daily and major expenses for a month or a year, but for the length of time you would have brought home a paycheck.