How much life insurance do I need? The simple math.

A new dad sat at his kitchen table with a quote in front of him and one question: is this enough? Here is the honest answer.

How much life insurance you need usually lands between 10 and 12 times your annual income. A sharper method, called DIME, adds up your Debts, the Income you want to replace, your Mortgage, and your kids’ Education, then subtracts what you have saved. For most working parents that math lands between $500,000 and $1.5 million.

The income-multiple rule of thumb

Start with the fast version: most households land near 10 to 12 times their annual income. Earn $80,000 a year, and that points you toward $800,000 to roughly $1 million in coverage. The logic is plain — a policy that size replaces about a decade of your paycheck, which gives your family time to adjust without a sudden drop in how they live.

Why a decade? Because the death benefit, invested conservatively, can throw off income for years while the principal lasts — so ten times your salary tends to fund considerably more than ten years of spending. Some families stretch the multiple to 12× or 15× when they want a longer runway or expect their income to climb. The exact number is a judgment call; the point is to anchor on replacing income, not on a round figure that feels comfortable.

It is a starting point, not the finish line. The multiple says nothing about a big mortgage, a houseful of young children, or the fact that one earner carries the whole load. Think of 10× as the number you sanity-check everything else against. The Insurance Information Institute describes the same idea: income replacement is the anchor, and your own obligations move the figure up or down from there. That is exactly what the DIME method does next.

The DIME method, step by step

DIME turns the guess into a sum. It is four numbers you add together, and the name is the checklist — Debt, Income, Mortgage, Education. Walk down the list:

1. 1.Debt. Add up what would not disappear if you did — credit cards, car loans, co-signed or personal loans, and your final expenses. A median U.S. funeral with burial runs about $8,300, per the National Funeral Directors Association, so most people fold a burial figure in here.
2. 2.Income. Decide how many years you want to replace your paycheck, then multiply. Ten years of an $80,000 income is $800,000. Pick the number of years that carries your family to a point where they are steady — often until the youngest child is grown.
3. 3.Mortgage. Add the full payoff balance on your home. Clearing the mortgage means your family keeps the house without the monthly payment, which is frequently the single largest line in the whole calculation.
4. 4.Education. Estimate what it would cost to get each child through school. Federal data from NCES puts average yearly tuition, fees, room, and board in the tens of thousands per year, so families with two or more kids often add a six-figure line here.

A worked example: meet the Reyes family

Numbers land better with a name attached, so meet Maria and David Reyes. David earns $80,000 a year. They have two kids, ages 4 and 7, a $240,000 balance left on the mortgage, a $14,000 car loan, and about $30,000 in savings. Here is the DIME math for a policy on David:

Their gross need comes to roughly $1.36 million. Subtract the $30,000 in savings, and the gap a new policy would fill is about $1.33 million. The 10×-income rule of thumb would have said $800,000 — which is why the rule is only a starting point. The mortgage and two college funds pushed the Reyes family’s real number well past it. Round to a clean figure, and David is looking at a $1.25 to $1.5 million policy.

One more line worth adding for this family: Maria. If she manages the home and the kids while David works, replacing her childcare and household work has a real cost — the Bureau of Labor Statistics tracks those wages. A $250,000 to $500,000 policy on a stay-at-home parent is common, sized to what it would take to keep the household running.

How long the coverage should last

The amount is only half the question. The other half is how many years the coverage needs to stand — and the answer is the length of time someone depends on you. Match the term to the obligation, and you are not paying for years you do not need.

For the Reyes family, the heavy years run until the kids are grown and the mortgage is gone. With a 7-year-old at home and a mortgage on a similar timeline, a 20-year term — level coverage for 20 years — lines up cleanly: it carries them through college and clears the loan. A parent with a newborn might reach for a 30-year term instead; someone five years from a paid-off house might need only 15.

• Tie the term to the longest obligation. Usually that is the younger child reaching independence, or the mortgage payoff date — whichever runs longer.
• You can layer terms. Some families stack a 30-year policy for the income-replacement years on top of a 15-year policy that covers the mortgage, so coverage steps down as the need shrinks. It is a way to hold a large benefit early without overpaying late.
• Permanent coverage is for needs that never end. If the goal is to leave something behind no matter when, or to cover a lifelong dependent, that points toward permanent rather than term. The need, not the calendar, decides.

The takeaway is simple: size the benefit with DIME, then size the years to the obligation. A policy that is the right amount but expires the year before your youngest finishes school has solved the wrong half of the problem.

A needs table you can copy

If you would rather skip the arithmetic, here is a quick reference. Find the row closest to your life, and you have a defensible ballpark to start from. These are illustrative ranges, not quotes — your own DIME number is always the better guide.

Notice the pattern down the rows: coverage scales with the people and the debts depending on you, not with your age or your tastes. A single renter with no dependents needs little. A sole earner with young kids and a mortgage needs the most. Most readers sit somewhere in the middle and are surprised the figure is larger than they assumed.

What that coverage tends to cost

A large number on paper can feel expensive until you price it. For a healthy person in their 30s or 40s, term life — coverage for a set number of years, with no savings component — is usually the most affordable way to carry a big benefit. Our guide to how term life insurance works walks through why.

Those figures are illustrative, not a quote — your actual rate depends on age, health, tobacco use, the term length, and the insurer. But the shape holds: a 35-year-old in good health can often carry $500,000 for the price of a couple of dinners out a month. If you want permanent coverage that lasts your whole life instead, our guide to whole life insurance covers how that pricing differs and why.

What to subtract before you buy

Your gross need is not the size of the policy you buy. Two things come off the top first, so you are not paying for coverage you already have:

• Liquid savings and investments. Money your family could actually reach — emergency funds, brokerage accounts, existing cash value — reduces the gap. Retirement accounts count too, with the caveat that tapping them early can carry taxes and penalties.
• Coverage already in force. Any policy you own counts against the need. Group coverage through work counts too, but treat it gently: it typically runs one to two times salary and usually ends when the job does. The III notes employer coverage often is not portable, so it is a layer on top of a policy you own, not the foundation.

Subtract those from your DIME total, and what remains is the honest gap — the amount a new policy actually needs to fill. If you hold several policies already and are not sure how they add up, our guide to owning multiple life insurance policies shows how to read the stack as one number.

When to keep what you have

Sometimes the right answer is to buy nothing. If your DIME number comes out at or below the coverage you already hold — and that coverage is a policy you own, not just group insurance tied to a job — you are covered. Adding more would be paying for a gap that is not there.

A few situations point the same way. If you have no dependents and no debt that would pass to anyone, a small policy for final expenses may be all you need. If your kids are grown, the house is paid off, and your savings would carry your spouse, your need has likely shrunk since you first bought in. That is worth a look, not an automatic upgrade.

If you do want a second set of eyes on the figure, that is the heart of a free policy review: someone runs the DIME math with you, counts what you already have, and tells you whether there is a real gap. You can also start from our plain-English guides to the types of life insurance if you are still deciding which kind fits the number.