The short version: a good estimate is the income your family would need for as long as they'd need it, plus your mortgage and debts, plus future costs like college and a funeral, minus savings and existing coverage. The calculator below does the math.
Life insurance calculator
This calculator gives a rough estimate for planning only. It doesn't account for inflation, investment returns, taxes, or Social Security survivor benefits.
How the calculation works
This is a version of the DIME method (Debt, Income, Mortgage, Education), one of the most common approaches planners use:
- Income replacement: your income times the number of years your family would depend on it. Often until your youngest child is independent or your spouse reaches retirement.
- Mortgage and debts: the amount needed to pay them off so your family isn't stuck with the payments.
- Education: what you want to set aside for each child's school costs.
- Final expenses: funeral costs and final medical bills, often $10,000 to $20,000.
- Subtract what you already have: savings your family could use and any existing life insurance, including coverage through work.
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Rules of thumb, and where they fall short
- 10 to 12 times your income: quick and easy, but ignores your mortgage, kids, and savings. It can badly under- or over-shoot.
- Income times years until retirement: reasonable for single-income families, but often too much for dual-income households.
- Just cover the mortgage: leaves nothing for everyday living costs.
The calculator above is a better starting point because it uses your actual numbers.
Don't forget a stay-at-home parent
A parent who doesn't earn a paycheck still provides childcare, transportation, cooking, and household management. Replacing those services costs real money. Many families buy $250,000 to $500,000 of term coverage on a stay-at-home parent.
Why coverage through work usually isn't enough
Group life insurance through an employer is often one or two times your salary. It's a helpful extra, but it usually ends if you leave the job, and it rarely covers a family's full need. Most people with dependents benefit from an individual policy they own themselves.
Frequently asked questions
Is $500,000 of life insurance enough?
Can I have too much life insurance?
Should I count Social Security survivor benefits?
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