Life Insurance Series
Life · How Much Coverage
How Much Life Insurance
Do You Actually Need?
The most common amount of life insurance Americans carry is also the most wrong: 1-2x annual income. That covers maybe 18 months of family expenses — then the money runs out while the kids are still in elementary school.
annual income — the actual rule of thumb
For families with dependents. This funds replacement income for 20+ years, pays off the mortgage, and covers college costs. Most families need significantly more than they have.
Three ways to calculate
The Multiplier Method (quick)
10-15× your annual income, depending on your situation. Younger with kids = closer to 15×. Older with grown kids = closer to 10×. Fast, rough, but better than nothing.
The DIME Method
Add up your Debts, Income (years needed × annual), Mortgage balance, and Education costs (estimate $200K/kid for college). The total is your coverage target. More accurate than a flat multiplier.
The Replacement Income Method
Calculate how much capital your family needs to generate your current income safely (typically dividing by 0.04 for a 4% safe withdrawal). For $100K income that's $2.5M. Add mortgage + college on top. Most accurate, most thorough.
The actual DIME breakdown for a typical family
For a 35-year-old in good health, a 20-year $1.6M term policy runs roughly $50-$75/month.
Want a real number for YOUR situation?
We'll walk through DIME with your actual numbers — debts, income, mortgage, kids — and tell you exactly how much you need plus what it costs.
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Common questions
How do I calculate how much life insurance I need?
Use DIME: add your Debt, Income to replace, Mortgage, and Education costs. Subtract savings and coverage you already have. That number is your real need.
Is ten times my income the right amount?
It is a rough guess that misses the mortgage and college. DIME gets to a number built on your actual life, which is usually higher for a young family.
How many years of income should I replace?
Until your youngest child is independent is the common rule. A family with a five year old is replacing far more years than a family with teenagers.
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