How Much Life Insurance
Do You Actually Need?

How to use this calculator

This calculator uses the DIME method, a framework used by financial planners to estimate life insurance needs. DIME stands for Debts, Income, Mortgage, and Education. It builds your coverage need from the ground up based on what your family would actually need, then subtracts what they already have.

• 1
  Enter the income you want to replace
  Think about what it would cost your family to maintain their lifestyle if your income disappeared. For dual-income households, consider whether your spouse's income alone would cover your current expenses, and for how long they would need a cushion.
• 2
  Add your major financial obligations
  Mortgage balance, car loans, student loans, credit card balances. These are debts your family would still owe if you were gone. The goal is for your insurance to eliminate these so your family is not making debt payments without your income.
• 3
  Estimate education costs for each child
  A common target is enough to fund four years of an in-state public university for each child. If college funding is already handled through 529 plans, you can reduce this number accordingly.
• 4
  Enter what you already have
  Include employer-provided group life insurance and any individual policies. Also enter liquid savings your family could access. This reduces the gap your new policy needs to fill.
• 5
  Review the coverage gap and term recommendation
  The calculator shows how much additional coverage you need and suggests a term length based on your age and situation. Term length should generally cover your working years or until your youngest child is financially independent.

How to interpret your results

• The coverage gap is the number that matters most. Your gross need is the total your family would require. The gap after subtracting existing insurance and savings is what a new policy actually needs to cover. Many people are surprised to find they are significantly underinsured even after accounting for employer coverage.
• Employer group coverage is a starting point, not a solution. Most employer policies offer one to two times your annual salary. On a $200,000 income, that is $200,000 to $400,000 in coverage. This calculator often shows that families with young children need five to ten times income or more. Employer coverage also disappears if you change jobs.
• Term life is almost always the right tool for income replacement. Term life insurance covers a specific period, such as 20 or 30 years, at a fixed premium. It is significantly less expensive than permanent policies and is purpose-built for replacing income during your working years. For most high-earning families, term is the appropriate product.
• The term length should match your longest financial obligation. If your youngest child is 2, you probably want a 25- or 30-year term. If your mortgage has 18 years remaining and your kids are teenagers, a 20-year term may be sufficient. The goal is to have coverage through the years when your family is most financially dependent on your income.
• Both spouses should carry coverage. Even a non-working or lower-earning spouse provides significant economic value through childcare, household management, and other contributions. If that person were gone, the surviving spouse would need to pay for services or reduce their working hours. That has a real dollar cost that insurance should cover.

Common mistakes people make with life insurance

• Relying entirely on employer-provided coverage. Group life insurance through an employer is usually one to two times your salary, often taxable to your beneficiaries, and goes away when you leave the job. It is a starting point, not a complete plan. Individual term policies are portable, often more affordable for healthy applicants, and stay with you regardless of employment.
• Using the "10 times income" rule without thinking. Rules of thumb exist because they are easy to communicate, not because they are accurate. Ten times income does not account for your mortgage balance, number of children, existing assets, your spouse's income, or how long your family would actually need support. The DIME method in this calculator is more accurate.
• Waiting until you need it to think about it. Life insurance is priced on your age and health at the time of application. A 30-year-old in good health pays dramatically less than a 45-year-old with a health history. The best time to lock in a policy is when you are young and healthy, even if you feel like you do not need it yet.
• Buying whole life when term is what you actually need. Whole life and other permanent policies are significantly more expensive than term. They have their place in certain estate planning and business scenarios, but for most people who simply want to protect their family's income during working years, term life is the right tool at a fraction of the cost.
• Not updating coverage after major life events. Having a child, buying a home, getting a significant raise, or losing a spouse all change your coverage need. Life insurance is not a set-it-and-forget-it decision. A quick review every few years, or after any major financial event, ensures your coverage reflects your actual situation.
• Naming the estate instead of specific beneficiaries. Life insurance proceeds pass outside of probate when you name a specific beneficiary, such as your spouse or a trust. If you name your estate, the payout goes through probate, can be delayed, and may be subject to creditors' claims. Always name a specific beneficiary and keep it updated.