How much life insurance do you actually need?

Not a sales number — a method. Ten minutes with this guide and you'll know your range before you ever talk to an agent.

Last updated: July 16, 2026 · 6-minute read

The short answer

Enough to pay off what you owe and replace your income for the years your family would need it. For most working parents that lands between 7× and 15× annual income — but the honest answer depends on your debts, your mortgage, and your kids' ages, which is why a method beats a rule of thumb.

The DIME method (what we actually use)

DIME walks through the four things a death benefit needs to cover. Add them up, subtract what you already have, and you have your number.

D — Debt. Credit cards, car loans, student loans that wouldn't be discharged, personal loans, plus final expenses (a funeral averages around $9,000).
I — Income. Your annual income multiplied by the number of years your family would need it replaced. Common choice: until the youngest child is independent, or until your spouse's retirement plan can take over. Ten years is a typical starting point.
M — Mortgage. The remaining balance — so your family keeps the home without keeping the payment.
E — Education. Future college or private-school costs. Around $100,000 per child is a common planning figure for a public in-state degree.

Then subtract savings that would realistically be used and any life insurance you already have (including group coverage through work — with the caveat below).

A worked example

Maria, 35, earns $75,000. Her family: a spouse and two kids, ages 4 and 7. Remaining mortgage $250,000, car loan and cards $10,000, savings $30,000, group policy at work $75,000 (1× salary).

Debt: $10,000 (+ ~$9,000 final expenses ≈ $19,000)
Income: $75,000 × 15 years (until the youngest is ~19) = $1,125,000
Mortgage: $250,000
Education: 2 kids × $100,000 = $200,000
Minus savings and work coverage: −$105,000

Total: roughly $1.49M — she'd shop a $1.5M 20-year term policy. At her age and health that's plausibly in the range of $55–75/month. Notice how far this is from the $250,000 "default" many people pick — and also how affordable seven figures of term coverage can be.

What people get wrong

Counting on work coverage. Group life is usually 1–2× salary and disappears when you change jobs — treat it as a bonus, not a plan.
Insuring only the breadwinner. A stay-at-home parent's work — childcare, transport, household management — costs real money to replace. Coverage for both partners is the norm, not the exception.
Rounding down to make the premium smaller. Term pricing scales gently: going from $500K to $1M rarely doubles the premium. Get the right amount; shorten the term if budget is tight.
Waiting. Every birthday — and every new health finding — makes the same coverage more expensive. Rates are locked at the age and health you apply with.