🎯 Quick Rules of Thumb
Simple Rule
your annual income
With Kids
per child for education
With Mortgage
remaining on home
đź“Š Life Insurance Calculator
Enter your information for a personalized coverage recommendation:
Recommended Coverage
Income replacement + debts + education - existing coverage
The DIME Method (What Agents Use)
Financial planners often use the DIME formula for a more precise calculation:
Debt
Total of all debts: mortgage, car loans, student loans, credit cards. Your family shouldn't inherit your obligations.
Income
Annual income Ă— years until retirement (or until kids are independent). This is usually the largest component.
Mortgage
Remaining mortgage balance so your family can stay in the home. (Some include this in "Debt")
Education
Estimated college costs for each child. Average is $100K-$150K for 4-year public university (including room/board).
Coverage by Life Stage
👶 Young Family (Kids Under 10)
Maximum coverage need. Kids dependent for 15+ years, likely have mortgage, may have student loans.
Typical need: $750K - $1.5M
20-30 year term recommended
🎓 Kids in High School/College
Still significant need, but shorter horizon. College costs loom, mortgage may be partially paid.
Typical need: $500K - $1M
10-20 year term recommended
🏠Empty Nesters (Kids Independent)
Reduced need. Kids self-supporting, mortgage may be paid off, retirement accounts building.
Typical need: $250K - $500K
10 year term or consider dropping
đź’Ľ Single, No Dependents
Minimal need. Mainly to cover debts and final expenses so family isn't burdened.
Typical need: $50K - $100K
Or skip entirely if no debts
Common Coverage Mistakes
❌ Relying Only on Employer Coverage
Most employer plans offer 1-2x salary—far below what families need. Plus, you lose it if you change jobs. Get your own policy.
❌ Insuring Only the "Breadwinner"
Stay-at-home parents provide enormous value: childcare, housekeeping, transportation. If they died, the working spouse would need to pay for these services. Both parents should be insured.
❌ Buying Too Much Whole Life
Some agents push expensive whole life when term would suffice. A $500K whole life policy costing $400/month could be replaced with $500K term for $30/month—leaving $370/month for other investments.
❌ Not Updating After Life Changes
Had another kid? Bought a bigger house? Got promoted? Your coverage needs change. Review your policy after major life events.
Frequently Asked Questions
Can I have too much life insurance? â–Ľ
Technically, insurers won't approve coverage significantly exceeding your financial need (they don't want beneficiaries to profit excessively from death). In practice, most people are underinsured, not overinsured. If you can afford the premiums and have dependents, more coverage provides more security.
Should I buy life insurance for my children? â–Ľ
Generally no. Life insurance replaces economic contribution—children don't have income. The main legitimate reason is to lock in their insurability if there's a family history of health issues that might make them uninsurable later. Otherwise, it's usually unnecessary.
How does my spouse's income affect coverage needs? â–Ľ
If your spouse earns enough to support the family alone, you need less coverage. The goal is to maintain lifestyle, not provide a windfall. However, consider: could they maintain childcare + mortgage + their career without your income? Often the answer requires more coverage than expected.
The Bottom Line
Most families need 10-12x their annual income in life insurance, plus enough to cover debts and children's education. Use the calculator above for a personalized estimate, then compare quotes from multiple providers.
Remember: it's better to be slightly overinsured than underinsured. Term life insurance is affordable enough that the peace of mind is worth a few extra dollars per month.