How much life insurance do you need?

The right amount is the number that lets the people who depend on your income keep their standard of living. Most families need more than an employer's group policy provides, and term insurance is usually the cheapest way to get it.

The DIME method

Add four numbers: Debts (credit cards, car loans, personal loans), Income replacement (often 10× annual income, or enough years to cover the children's dependency), Mortgage balance, and Education costs for each child. Subtract existing savings and cover you already have. The result is a rough death benefit — a starting point, not a precise answer.

A worked example

Income $75,000 (10× = $750,000), mortgage $240,000, other debts $15,000, two children's education $120,000: about $1.13 million. With $100,000 saved and a $150,000 group policy from work, the gap is roughly $880,000. A 20-year level term policy for that amount is often surprisingly affordable for a healthy 30–40 year old.

Term versus whole life

Term covers a set period (10, 20, 30 years) with no cash value — cheap per dollar of cover, ideal when the need is temporary (until the mortgage is paid, children finish school, retirement savings grow). Whole life and universal policies last for life, build cash value and cost far more; they can make sense for estate planning or permanent needs, but they are usually an expensive way to buy pure protection.

Do not rely on group cover alone

Employer group life is typically 1–2× salary, ends when the job ends, and is not portable. Use it as part of the total, not the plan.

Review it

Reassess when you marry, have children, buy a home, change income, or when a policy term ends. Cover that felt generous at 30 can be inadequate at 40.

Written and maintained by the Calculators data team · last reviewed 2026-10-24 · sources and methodology.