How Much Life Insurance Do You Actually Need?
"Buy 10x your salary" is a rule of thumb, not a calculation. It ignores your debt, your kids, and whether your income is even the biggest number in the room. Here's a real way to land on a number.
Multiples-of-salary rules are easy to remember, which is exactly why they're everywhere — and exactly why they're wrong for a lot of people. A single 32-year-old renter with no kids and no debt needs a very different number than a 32-year-old with a mortgage, a spouse who left the workforce to raise two kids, and a car loan. Same salary, wildly different exposure.
The more useful approach is called DIME — Debt, Income, Mortgage, Education. It adds up the actual dollar amounts your family would need to cover if your income disappeared tomorrow, instead of guessing based on a multiple.
The DIME breakdown
| Letter | What it covers | How to estimate it |
|---|---|---|
| Debt | Everything besides the mortgage — car loans, credit cards, student loans, personal loans | Add up current balances |
| Income | Years of income your family would need replaced | Annual income × number of years (commonly 10–20) |
| Mortgage | What's left on your home loan | Current mortgage payoff balance |
| Education | Future costs for kids' education | Rough estimate per child, in-state vs. private |
Add the four numbers together, subtract any existing coverage (savings, existing policies, employer group life), and what's left is your gap — the number to actually insure.
Illustrative example: dual-income household, two kids
Illustrative example only — plug in your own numbers using the calculator below. Every household's DIME total looks different.
What DIME misses (and why it still matters to check)
DIME is a floor, not a ceiling. It doesn't account for childcare costs if a surviving spouse needs to pay for care they used to provide themselves, funeral costs, or a cushion for the unexpected. Some people add a flat 5–10% buffer on top of the DIME total for exactly that reason.
It also doesn't distinguish between a single-income household and a dual-income one — if both partners work, you generally want to run DIME twice, once for each partner's income and role, since losing either income creates a real gap.
If you're a stay-at-home parent, don't skip this. Your "income" isn't zero — it's the cost of replacing childcare, meal prep, and household management your family would otherwise have to pay for. That number is very real and often underinsured.
Term length matters as much as the number
Once you have a target coverage amount, the next question is how long you need it. A 20-year term is common for parents with young kids; a 10-year term can cover a shorter-horizon debt. If your obligations phase out at different times, consider laddering multiple policies instead of buying one flat policy for the full amount and full term.
A simple way to double-check your number
- Add up debt (excluding mortgage) + years of income replacement needed + mortgage balance + estimated education costs.
- Subtract existing savings, investments, and any current life insurance (including employer group life).
- What's left is your target coverage gap — round up, not down.
Get your exact number
Our free calculator walks through DIME with your real numbers and gives you a target coverage amount in under two minutes.
Use the calculator →