Key takeaways
- A common shortcut is 10–15 times your income, but it misses debts, your mortgage and future costs like college.
- The DIME method — Debt, Income, Mortgage, Education — gives a more personal number.
- Subtract savings and existing coverage, then choose a term that lasts as long as the need.
The quick rule of thumb
Many people start with 10 to 15 times their annual income. It's easy, but it can be far off. A 30-year-old with a new mortgage and two young kids needs a very different amount than a 55-year-old whose house is nearly paid off.
The DIME method
DIME adds up the four biggest things your family would need to cover:
- Debt: car loans, credit cards, personal and student loans (not including the mortgage).
- Income: your annual income multiplied by the number of years your family would need it — often until your youngest child finishes school.
- Mortgage: the remaining balance on your home.
- Education: expected college or trade school costs for your kids.
Then subtract what's already available: savings and investments your family could use, and any life insurance you already have, including coverage through work.
An example
| Item | Amount |
|---|---|
| Debt | $25,000 |
| Income ($70,000 × 15 years) | $1,050,000 |
| Mortgage balance | $310,000 |
| Education (two kids) | $120,000 |
| Total need | $1,505,000 |
| Minus savings | −$60,000 |
| Minus group life at work | −$140,000 |
| Coverage gap | $1,305,000 |
In this example, a $1.3–$1.5 million term policy would close the gap.
Don't forget these costs
- Final expenses: funerals commonly cost thousands of dollars.
- Childcare: if a stay-at-home parent passes away, replacing that care is expensive.
- Health insurance: if your family is covered through your job, they may need to buy their own.
How long should your coverage last?
Match the term to the need. If your youngest is 3 and your mortgage has 27 years left, a 30-year term covers both. Needs that never go away — like final expenses or leaving an inheritance — are where permanent coverage such as whole life or an indexed universal life policy can make sense.
Common mistakes
- Counting only work coverage. Group life is often one or two times salary and usually ends when you leave the job.
- Forgetting the non-earning spouse. Their work at home has real replacement cost.
- Waiting. Premiums are based on age and health, so the same coverage usually costs more every year you wait.
The bottom line
Run the DIME numbers, subtract what you already have, and cover the gap for as long as your family would need it. A licensed agent can do the math with you in a few minutes and compare prices across carriers.
Sources
Run your own numbers in 60 seconds.
Use our DIME calculator, then compare quotes for that amount from multiple carriers.
Frequently asked questions
Is 10 times my income enough life insurance?
It's a reasonable rule of thumb, but it ignores your mortgage, debts, kids' ages and savings. The DIME method gives a more personal number.
Should stay-at-home parents have life insurance?
Yes. Replacing childcare, household management and transportation can cost tens of thousands of dollars a year.
How long should my term be?
Long enough to cover your biggest obligations — often until your youngest child is independent or your mortgage is paid off. Many families choose 20 or 30 years.
This article is for general education and isn't legal, tax or financial advice. Coverage and availability vary by carrier and state.