A common rule of thumb is 10–15 times your annual income. If you earn $75,000, that's $750,000–$1,125,000 in coverage. However, a more precise calculation considers your debts, dependents, and future financial obligations.
Life insurance replaces your income to protect your dependents if you die. The right amount ensures your family can maintain their lifestyle, pay off debts, and fund future goals (like college) without your income.
The DIME method provides a more accurate calculation: • **D — Debt**: Total all debts (mortgage, car loans, student loans, credit cards) • **I — Income**: Multiply your annual income by the number of years your family would need support • **M — Mortgage**: Include the remaining mortgage balance (if not already in Debt) • **E — Education**: Estimated college costs for each child
Example: $200K mortgage + $30K other debt + ($75K income × 15 years) + ($120K × 2 kids for college) = $1,595,000 in coverage needed.
Term life insurance (20–30 year term) is the most cost-effective option for most families. A healthy 30-year-old can get a $1M 20-year term policy for $30–$50/month.
More dependents = more coverage needed. Consider children's ages — younger children need support for more years. A stay-at-home parent also needs coverage to replace the value of childcare, cooking, and household management.
Your life insurance should cover all debts so your family isn't burdened. Include mortgage, car loans, student loans, and credit card balances. Some debts (like federal student loans) are discharged at death, but private loans may not be.
College tuition for children ($100K–$250K each), wedding contributions, or caring for aging parents. These future costs should be factored into your coverage amount.
Subtract existing savings, investments, and any employer-provided life insurance from your total need. Many employers offer 1–2x salary in free coverage, but this is rarely enough on its own.
Use our Savings Goal Calculator to calculate your personalized answer based on your specific situation.