📊 The Underinsurance Problem
Parents Underinsured
50%+
by $200K or more
Average Coverage
$180K
vs needed $500K+
No Life Insurance
40%
of parents
📐 The DIME Formula: How Much You Need
Use the DIME formula to calculate your life insurance need:
D = Debt
Mortgage, car loans, student loans, credit cards. All debts your family would inherit.
I = Income Replacement
Your annual salary × years until youngest child is 18. This is usually the biggest number.
M = Mortgage
Remaining mortgage balance (if not included in Debt). Let family stay in their home.
E = Education
Estimated college costs for each child. $100K-200K per child is reasonable.
Example Calculation:
D (Debt): $30,000 (car + credit cards)
I (Income): $80,000 × 18 years = $1,440,000
M (Mortgage): $300,000
E (Education): $150,000 × 2 kids = $300,000
Total Need: $2,070,000
Term vs. Whole Life: The Real Answer
For most parents, term life insurance is the clear winner. Here's why:
Term Life
- ✓ $1M coverage: ~$50/month (healthy 35yo)
- ✓ Covers you during child-raising years
- ✓ Simple to understand
- ✓ Get 10x more coverage for same price
Whole Life
- ✗ $1M coverage: ~$800+/month
- ✗ "Investment" component has poor returns
- ✗ Complex, easy to get wrong
- ✗ High commissions incentivize agents to push
The exception: Whole life can make sense for estate planning at high net worth ($5M+) or if you have a special needs dependent. For typical parents? Term.
⚠️ Both Parents Need Life Insurance
Don't skip coverage for the stay-at-home parent. Their economic value is real:
Stay-at-Home Parent Value:
- • Childcare: $20,000-40,000/year
- • Housekeeping: $5,000-10,000/year
- • Cooking/meal prep: $5,000/year
- • Driving/logistics: $3,000-5,000/year
- • Other services: $5,000+/year
- Total: $40,000-60,000+/year
If the stay-at-home parent dies, the working parent needs to pay for all these services while grieving and working.
Term Length: How Long?
Cheapest. Only if you're older and kids are almost grown.
Most popular. Good balance of coverage length and cost.
Best for new parents with young children. Covers until they're adults.
Rule of thumb: Get term that lasts until your youngest child is 22-25 (through college).
Best Life Insurance Companies for Parents
Haven Life (by MassMutual)
Simple online process. Instant decisions for many applicants. Backed by A++ rated MassMutual.
Ladder
Adjust coverage as needs change. No medical exam for many. App-based experience.
Northwestern Mutual
If you want an advisor. A++ rated. Higher prices but excellent dividend history on whole life.
The Bottom Line
Most parents need $500K-2M in term life insurance—far more than the average $180K carried today. Use the DIME formula to calculate your specific need. Buy term, not whole life—you'll get 10x more coverage for the same price. Both parents need coverage, including stay-at-home parents. Get a 20 or 30-year term that lasts until your kids are grown. And don't wait—premiums only go up with age.