How Much Life Insurance Do You Need? Calculator & Rules
Use the DIME method and income replacement rules to calculate the right term life insurance coverage amount.
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Key Takeaways
- 1Term life insurance is sufficient for most families — skip whole life for investment.
- 2Coverage rule of thumb: 10–12x annual income if you have dependents.
- 3DIME method: Debt + Income replacement + Mortgage + Education costs.
- 4Stay-at-home parents need coverage too — replace childcare and household labor.
Life insurance answers one question: if you died tomorrow, would your family be financially okay? For most working adults with dependents, the answer requires 10–12x annual income in term coverage.
Estimate your need with our life insurance calculator.
Term vs Whole Life
Term life covers you for 10–30 years at low cost ($30–$50/month for $500,000 on a healthy 35-year-old). Whole life mixes insurance with investment at 5–10x the cost.
For 95% of families, term life plus separate investing in index funds is the better financial choice.
The DIME Method
Debt: total outstanding balances. Income: 10 years of salary replacement. Mortgage: remaining balance. Education: estimated college costs per child.
Add them together, subtract existing savings and current life insurance, and you have your coverage gap.
When to Buy and Review
Buy when you have dependents, a mortgage, or anyone relying on your income. Review coverage after marriage, children, or a home purchase.
Pair with financial milestones — life insurance is a key 30s goal.
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