Most formulas are oversimplified. Here's how to get the real number for your family.
Ask five different people how much life insurance you need and you'll get five different answers: "10 times your salary." "Enough to pay off your mortgage." "Whatever your HR department offers." None of them are wrong exactly — but none of them actually answer the question for your situation. The real answer depends on what your family would need to survive, and thrive, if you weren't there to provide it anymore.
This article walks you through the most thorough method available — the DIME formula — and explains why the shortcuts so many people rely on leave dangerous gaps.
The most popular rule of thumb is to buy life insurance equal to 10 times your annual income. It's simple, easy to remember, and a reasonable starting point — but it ignores almost everything that actually matters: your debt load, whether your spouse works, how many kids you have and how old they are, whether you have a mortgage, and what your family's actual monthly expenses look like.
A 35-year-old earning $80,000 with three kids under age 10, a $400,000 mortgage, and a stay-at-home spouse needs dramatically different coverage than a 55-year-old earning the same salary with grown children, a paid-off home, and a working spouse. The 10x formula treats them identically. It shouldn't.
DIME stands for Debt, Income, Mortgage, and Education. Add these four numbers together and you get a coverage target that actually reflects your family's financial reality.
Add up every debt except your mortgage: car loans, student loans, credit card balances, personal loans, medical debt. Your life insurance should be large enough to wipe all of this out. Dying shouldn't mean passing debt to your survivors.
Multiply your annual income by the number of years your family would need support. If your kids are young and your spouse doesn't work, that might be 15–20 years. If your kids are teenagers and your spouse has a good income, it might be 5–10. A conservative approach: multiply by 10 and let invested proceeds fill the gap gradually.
Include the outstanding balance on your home loan. Losing a spouse is devastating enough. Losing the house on top of it can be catastrophic. This one is non-negotiable if you have dependents and a mortgage.
Estimate the future cost of college for each child. As of 2026, four years at a public university runs $120,000–$160,000 all-in, and private universities can exceed $300,000. You don't have to fully fund every child's college — but including a meaningful amount here protects options your kids currently have.
Marco, 36, earns $90,000/year. His wife Elena stays home with their two kids (ages 4 and 7).
Debt: $22,000 (car loan + credit cards)
Income: $90,000 × 15 years = $1,350,000
Mortgage: $380,000 remaining balance
Education: 2 kids × $130,000 = $260,000
Total coverage needed: $2,012,000
That's roughly $2 million — about 22 times his salary. The 10x rule would have suggested $900,000. The gap between those two numbers is the difference between Elena keeping the house and being able to stay home until the kids are older, versus scrambling to rebuild financially in the worst year of her life.
For most families, term life insurance is the right answer. Here's why: it provides the highest coverage amount for the lowest cost, and most people only need life insurance for a defined period — while the kids are young, while the mortgage is large, while one spouse depends on the other's income.
A 30-year-old male in good health can get a 20-year, $1 million term policy for roughly $35–$55/month. That's extraordinary protection for very little money. Whole life policies cost 5–10 times more for the same death benefit because they include a savings/investment component — one you typically don't need if you're focused on pure income replacement.
Whole life and universal life policies can make sense in specific situations — estate planning, business succession, or when you've maxed out other tax-advantaged savings vehicles. But the vast majority of families shopping for life insurance are better served by a 20 or 30-year term policy sized to their DIME number.
Your coverage needs change with your life. Review your policy any time:
A good rule: revisit your coverage every 3–5 years even if nothing dramatic has changed. As your kids get older and your mortgage gets smaller, you may find you're overinsured — which means you could reduce coverage and save on premiums.
💡 The bottom line: The right amount of life insurance is the amount that would let your family maintain their standard of living, eliminate their debts, and preserve their opportunities — without you. That number is different for everyone. Run the DIME formula with your actual numbers to find yours.
Our free life insurance calculator runs the DIME formula with your real inputs — no email required.
Calculate My Coverage →Life insurance is one of the most consequential financial decisions you can make, and it's also one of the most underpriced. A policy that costs the same as a streaming subscription can mean the difference between your family thriving and your family struggling after an unthinkable loss. Take the time to calculate what you actually need — don't leave that to a formula built for someone else's life.