Picture a kitchen table three weeks after the funeral. A spouse has the business dashboard open on a laptop they can't unlock, and next to it is a stack of bills. The monthly revenue chart is still beautiful, but it was never revenue. It was you, answering support emails at 11 p.m. and fixing the thing that broke. The chart is already going flat, and the mortgage is not.

Most solo founders feel financially secure in a way that is quietly false. They own something valuable, so they assume their family is protected. But a business that depends on one person's daily labor is not a stored pile of money. It is a stream of income, and the stream runs through you.

The mistake: confusing your income with your assets

Insurance educator S.S. Huebner argued in the early 1900s that a person's earning ability is itself an economic asset, and that dying destroys it. This is the "human life value" idea, and it is the foundation of how life insurance gets sized. A salaried employee's family at least has a paycheck pattern they can describe. A founder's income is lumpier, tied to their own attention, and often invisible even to the people who depend on it.

That is why the common rule of thumb, "buy 10 times your income," misleads founders. It is a rough industry heuristic, not a scientific finding, and it makes two assumptions that don't hold for you:

  • It assumes your income is a stable number. Yours may be $40,000 one year and $190,000 the next.
  • It assumes the business adds nothing after you're gone. Sometimes that's too pessimistic, because a business with documented systems might sell. For many solo founders it's accurate, because it simply stops.

So the useful question isn't "what multiple?" It's how long does each person who depends on me need to be financially okay, and what will the business realistically contribute during that time?

Think in runway, not multiples

A founder already understands runway. Apply it to your household instead of your startup.

One common starting framework is often called DIME, shorthand used in the insurance industry: Debt, Income, Mortgage, Education. It's a checklist rather than a formula backed by research, but it forces specificity. Go through each piece:

Debt. List what survives you. Personal debts typically get paid from the estate before heirs receive anything, and anything you personally guaranteed, such as a business loan or lease, can follow your estate or a co-signer. Insurance proceeds can cover these so no one has to liquidate something under pressure.

Income. Decide how many years your household needs replaced income. For a partner with a career who just needs a bridge, that might be two or three years. For a partner who stepped back from work, or for young children, it might be a decade or more. Then pick a realistic annual figure, such as the household's actual spending, not your best revenue year.

Mortgage. Decide whether you want it paid off or just made manageable. Both are legitimate. Paying it off removes the single biggest fixed cost from a grieving household.

Education. If you have children, name the goal. It might be a specific amount, or simply "help with college." Vague intentions can't be priced, and unpriced intentions don't get funded.

Then subtract what already exists: savings, any existing coverage, and an honest estimate of what the business could actually sell for or keep earning without you. If the answer to the last one is "I don't know," that is information too. A business nobody else can run is worth far less to your family than its revenue suggests. (That's the quiet argument for documenting how things work, but it's a separate project.)

Why self-employed people get this wrong in both directions

Two biases pull founders in opposite directions.

The first is optimism about the business. Founders tend to value their companies through the lens of what they themselves could do with them. Your spouse can't do that. They are inheriting an asset they can't operate, which is a different thing than the one you imagine.

The second is present bias, the well-documented tendency to overweight costs and benefits that are close in time. A premium is an immediate, certain expense, and the payoff is a distant, uncomfortable event. People feel the premium and not the outcome, so they underinsure or put it off for years.

The practical answer to both is to decide the number once, while calm, using runway thinking, and then make it automatic.

The type of policy matters less than people think

For most founders with dependents and a defined window of need, term life insurance, which covers a fixed period such as 20 years, is the usual fit. Permanent policies exist and have legitimate uses, but they cost considerably more per dollar of coverage, and "I need this until the kids are independent and the mortgage is gone" is a term-length question.

A few mechanics worth knowing, none of them exotic:

  • Proceeds generally pass by beneficiary designation, not by your will. The named beneficiary receives the money directly, typically without going through probate. That means the form you filled out years ago overrides whatever your will says. If the form still lists an ex-partner, they may be the one who gets paid.
  • Death benefits are generally not treated as taxable income to the beneficiary under U.S. federal law. Estate tax is a separate question. For 2026 the federal exemption is high enough, at $15 million per person, that most households won't face it, though some states have their own thresholds. If your situation is bigger or more complicated, that's a conversation for an attorney.
  • Underwriting is different when you're self-employed. Insurers often want to see tax returns or other proof of income to justify the amount. If your income is irregular, expect more questions, and apply for the coverage you can document.
  • There is usually a contestability period, commonly two years, during which an insurer can investigate misstatements on the application. Answer accurately. A claim denied over an omission is the worst possible discovery for a family.
  • Naming a minor child as beneficiary creates problems. A court may need to appoint someone to manage the money. A trust, or a properly designated custodian under your state's rules, usually works better. Ask an attorney how this works where you live.

Your next moves

  • Write down the real number for one year of household spending. Use bank statements, not memory. This is the base of your income-replacement figure.
  • Decide how many years each dependent needs support and multiply. Write the result next to the DIME items you listed (debt, mortgage, education).
  • Subtract what you already have: savings, existing coverage (including anything through a past employer, which usually ends when you leave), and a conservative estimate of what the business could actually sell for.
  • Pull up every existing beneficiary form today. Check life insurance, retirement accounts, and any bank accounts with payable-on-death designations. Fix anyone who's out of date, and make sure a contingent beneficiary is named.
  • Get at least two term quotes for the amount you calculated, and note where the policy number and agent contact will live so someone besides you can find them.

The part the policy can't do

A life insurance policy is a promise of money. It is not a map. The check can arrive and still leave a family unable to find the business bank account, the registrar login, or the person who knows how to wind down a customer base. Money buys time, but only when someone knows what the time is for.

That's the gap Heirloom is built for: a place to keep the vault, the handoff instructions, and the beneficiary details together, so the policy and the people it protects can actually be connected. If that sounds useful, you can look at it at https://heirloom.lumenlabs.works, but the five steps above are worth doing whether you ever do.