How Much Life Insurance Do I Need?
Rules of thumb say 10 to 12 times your income, but your real number comes from your debts, your dependents, and what you already own. Here is the calculation that gets it right.
Use the needs-analysis method: income times years of dependency, plus debts and education costs, minus savings and existing coverage. Most families land at 10 to 15 times income. Recalculate after major life events, and remember this is educational guidance, not financial advice.
The needs-analysis formula
Add: annual income x years your family needs it, plus outstanding debts including the mortgage, plus future education costs. Subtract: savings, investments, and existing life insurance including any employer policy. The remainder is your coverage gap.
Worked example: $100,000 x 15 years = $1,500,000, plus $300,000 in debts and $200,000 in education costs, minus $150,000 in assets and $250,000 of existing coverage, gives $1,600,000. Round to available policy sizes and sanity-check against the shortcut below.
Rules of thumb and their limits
The 10x rule (ten times income) is a fast sanity check, and the DIME method (Debt, Income x 10, Mortgage, Education) adds the big lump sums. Both beat guessing, and both miss nuance: they ignore your assets, your spouse's income, and how many years of dependency remain.
Use shortcuts to check the full calculation, not replace it. If the shortcut says $1,000,000 and the needs analysis says $1,600,000, trust the analysis; it knows about your mortgage and your kids' college costs. If they roughly agree, you have a solid number.
When to recalculate
New child, new mortgage, marriage, divorce, a big raise, or paying off the house: each changes the inputs enough to matter. Annual review takes ten minutes with the calculator on this site.
Needs usually peak in your late 30s and 40s, then fall as children grow, mortgages shrink, and savings compound. Many people can reduce coverage in their 50s, which is also when premiums rise steeply. Time term policies to expire as the need expires.
Skip the arithmetic
Run your numbers in the free life insurance calculator.
Coverage amount questions
Is $1 million in life insurance enough?
A $1,000,000 policy replaces $100,000 of income for about 10 years with nothing left for debts or college. High earners, single-income families with young kids, and large mortgages often need $1.5 to $2.5 million. The formula on this site gives your number in a minute.
Should both spouses have life insurance?
An earning spouse needs income replacement; a stay-at-home spouse needs coverage for childcare and household costs, often $500,000 to $1,000,000. Insuring only the earner leaves the family exposed if the caregiver dies. Term policies make covering both affordable.