"How much life insurance do I need?" is one of the most common questions people ask, and one of the most commonly guessed at. Too little coverage can leave your family short when they need it most. Too much means paying for coverage you don't use.

You don't need a financial planner to get a solid estimate. Grab a pen, or open a spreadsheet, and work through the five steps below. It takes about 15 minutes.

Got your number? Turn it into a real quote → See exactly what that coverage would cost you.

The quick answer: rules of thumb

You'll often hear that you should buy 10 to 15 times your annual income. It's a reasonable sanity check, but it ignores what makes your situation yours: how many kids you have, how big your mortgage is, how much you've already saved.

A needs-based estimate like the one below is more accurate, and it often gives a very different number for young families or people with big debts.

The DIME method, step by step

DIME stands for Debt, Income, Mortgage and Education, the four big things your coverage needs to handle. We'll add one more step to subtract what you already have.

Step 1: Debt and final expenses

Add up everything your family would need to pay off or pay for if you died:

  • Credit card balances
  • Car loans
  • Personal and student loans (note: federal student loans are generally discharged at death, but private loans may not be)
  • Final expenses, such as funeral costs, medical bills and estate settlement. Many families budget $10,000 to $20,000.

Your total for Step 1: $______

Step 2: Income replacement

Decide how many years your family would need your income, often until your youngest child is finished with school, or until your spouse reaches retirement. Then multiply:

Annual income your family relies on × years needed

Use the income your household actually depends on. For many people that's take-home pay, not gross salary.

Your total for Step 2: $______

Step 3: Mortgage

Write down your remaining mortgage balance. Paying it off means your family can stay in their home without a monthly payment. If you rent, consider adding several years of rent instead.

Your total for Step 3: $______

Step 4: Education

Estimate what you'd like to set aside for your children's college or training costs. Costs vary enormously between in-state public schools and private colleges, so pick a number that reflects your actual goals.

Your total for Step 4: $______

Step 5: Subtract what you already have

Now subtract the resources your family could already use:

  • Savings and investments (not counting retirement accounts you want your spouse to keep for retirement)
  • Existing life insurance you own personally
  • College savings already in place, such as 529 plans

Be careful with work-provided life insurance. Group coverage through your job usually ends when you leave that job, so many people don't count it, or count only part of it.

Your total for Step 5: $______

Your estimate

Step 1 + Step 2 + Step 3 + Step 4 − Step 5 = your coverage estimate

A worked example

Maria is 35, earns $70,000 a year, and is married with two children, ages 3 and 6. Here's how her numbers work out:

Step What's included Amount
1. Debt & final expenses $15,000 car loan + $15,000 final expenses $30,000
2. Income $70,000 × 15 years $1,050,000
3. Mortgage Remaining balance $250,000
4. Education $50,000 per child × 2 $100,000
Subtotal $1,430,000
5. Subtract $40,000 savings + $140,000 group life at work −$180,000
Estimated need $1,250,000

The "10 to 15 times income" rule would have suggested $700,000 to $1,050,000. Because Maria has two young children and a mortgage, her needs-based number is higher. That's exactly why it's worth running the numbers.

If Maria isn't sure she'll keep her job, she might leave out the $140,000 group coverage, which would raise her estimate to about $1.39 million.

Adjustments to consider

This worksheet is intentionally simple. A few things can move your number up or down:

  • Inflation. Living costs rise over time, which argues for a little extra cushion on the income step.
  • Investment returns. A lump sum that's invested can generate income, which argues for slightly less coverage. The simple method treats these two as roughly canceling out.
  • Your spouse's income. If your spouse earns a good income, you may need to replace less of yours, and they may need their own coverage.
  • Social Security survivor benefits. Children under 18 and a surviving parent caring for them may qualify for monthly benefits, which can reduce what you need.
  • Business debts. If you own a business and personally guaranteed loans, add those. Our guide to life insurance for the self-employed covers this in detail.

Don't forget a stay-at-home parent

A parent who doesn't earn a paycheck still provides enormous financial value: childcare, transportation, cooking, household management. If that parent died, the surviving spouse would likely need to pay for much of that care while still working.

Estimate the yearly cost of replacing that care in your area and use it in Step 2 in place of income. Many families find that a stay-at-home parent needs a substantial policy of their own.

Turning your number into a policy

Once you have a number, a few decisions remain:

  • How long you need it. Most needs, such as raising kids and paying the mortgage, shrink over time. A term policy that lasts until those needs are gone (often 20 or 30 years) usually fits, and it costs far less than permanent coverage. See term vs. whole life insurance to compare.
  • Laddering. Instead of one big policy, you can buy two or three with different terms, so your coverage and your premiums step down as your mortgage and child-rearing years end.
  • Round to a standard amount. Policies are usually sold in round amounts. In Maria's case, a $1.25 million 20- or 30-year term policy would line up neatly with her estimate.

Review your coverage after big life changes

Rerun this worksheet when you get married, have a child, buy a home, start a business, or pay off a major debt. Your needs change, and your coverage should keep up.

Ready for a real number?

Your worksheet gives you a solid starting point. To see what that coverage would actually cost, request a free life insurance quote. A licensed professional can double-check your estimate and compare policies for you, with no pressure.

Ready to see your price? Get my free life insurance quote → Takes a couple of minutes, no obligation.

Frequently asked questions

Is 10 times my salary enough life insurance?

It can be a reasonable starting point, but it often falls short for people with young children, large mortgages or college goals. A needs-based method like DIME gives a more accurate number.

Should I count my life insurance from work?

Count it carefully. Group life insurance usually ends when you leave your job, and it's often only one or two times your salary. Many people buy enough personal coverage to be protected without it.

How much life insurance does a stay-at-home parent need?

Estimate what it would cost to replace their work, including childcare, household help and transportation, for as many years as the children would need it. That amount is often more than families expect.

Do I need life insurance if I have no kids?

Possibly. If someone depends on your income, such as a spouse or aging parent, or if you have co-signed debts or want to cover final expenses, a policy can still make sense. If no one depends on you financially, you may need little or none.

How often should I recalculate?

Every few years, and after any major life event like marriage, a new baby, a home purchase or a big change in income.

This worksheet provides a general estimate for educational purposes, not personalized financial advice. Your actual needs depend on your full financial picture.