We calculated how much it would cost to pay off the house, hire a nanny and housekeeper, pay for a "typical" (don't ask me what that is, I think we just looked at a few local universities and rounded up) 4-year college education plus 5 years' salary for each of us (I was a sahm but planned to return and used my salary history for the calculations).
We had no debt other than the mortgage.
A fact not everyone knows: life insurance payouts are not taxed. Ever. Interest income is, obviously, but the payout itself is tax free.
10x and 20x salary seems like a crazy lot to me, but that is a very personal decision, I know.
Regarding funeral expenses, $20k doesn't seem too far off the mark for a modest service. We had an extremely-low-key service for my husband, who was cremated, and that still came to maybe $7k after all was said and done. Oh, and another little detail that not everyone knows (at least, this is how it worked for me): the funeral home wouldn't take one penny from me until the life insurance came through. He seemed to imply that that was an industry standard, at least if life insurance is coming into play. He certainly wasn't a family friend or anything, and had no reason to cut me any special deals or provide special treatment.