Key takeaways
- Life insurance should cover what your family would lose or owe if you died — not a random multiple of your salary.
- The DIME method adds Debts, Income replacement, Mortgage and Education, then subtracts savings and existing coverage.
- Most working parents end up needing 10–15 times their income; many buy far less.
- Work-provided coverage (often 1–2× salary) usually ends when you leave the job — don't count on it alone.
- Stay-at-home parents need coverage too: replacing childcare and household work is expensive.
The most common life insurance mistake isn't picking the wrong company — it's buying the wrong amount. Surveys consistently find that a large share of American families have no life insurance or say they don't have enough, and many people who do have coverage rely only on a policy through work that might pay a single year's salary.
There's a better way than guessing. In about ten minutes you can work out what your family would actually need, then buy that amount.
Use the life insurance calculator →
Start with the question life insurance answers
Ask yourself: if I died tomorrow, what would my family need money for, and for how long? Life insurance is there to fill that gap — to pay the bills you would have paid and the costs your death would create.
If nobody depends on your income and your debts would die with you, you may need very little. If you have young children and a mortgage, you probably need a lot.
The DIME method, step by step
- Debts — Add up car loans, credit cards, personal loans and any private student loans that a co-signer would be stuck with. (Federal student loans are discharged at death.)
- Income — Multiply the income your family relies on by the number of years they'd need it. A common choice is until your youngest child turns 18 or finishes college, or until your spouse reaches retirement.
- Mortgage — Add the remaining balance, so your family can stay in the home no matter what.
- Education — Add what you'd like to set aside for each child's schooling. Four years of in-state public tuition and fees is roughly $40,000–$45,000 today; private schools cost far more.
- Final expenses — Add $10,000–$15,000 for a funeral and end-of-life costs.
- Subtract what you already have — Savings and investments your family could use, plus any existing life insurance.
The number left over is the coverage to shop for. Round up to the next $25,000 or $50,000; the price difference is small.
A worked example
| Need | Amount |
|---|---|
| Income replacement: $60,000 × 15 years | $900,000 |
| Mortgage balance | $220,000 |
| Car loan and credit cards | $18,000 |
| Education: 2 children × $45,000 | $90,000 |
| Final expenses | $12,000 |
| Total needs | $1,240,000 |
| Minus savings and 401(k) the family could use | −$60,000 |
| Minus life insurance through work | −$120,000 |
| Coverage to buy | ≈ $1,060,000 |
That sounds enormous, but for a healthy 35-year-old non-smoker a $1 million, 20-year term policy is often in the range of $40–$70 a month. Coverage at this level is far more affordable than most people assume.
Want real prices, not averages?
A licensed agent can compare policies from several insurers for your age, health and budget. Free, no obligation.
Talk to a licensed agentQuick rules of thumb (and their limits)
- 10–12× income: a reasonable sanity check for working parents, but it ignores your mortgage and savings.
- Income × years until the youngest is 18, plus the mortgage: closer to DIME and easy to do on a napkin.
- $250,000 per earner: a floor some planners use for couples without children who share a mortgage.
Use rules of thumb to check your DIME number, not to replace it.
Don't forget the stay-at-home parent
A parent who doesn't earn a paycheck still provides childcare, transportation, cooking and household management. Replacing that work with paid help can easily cost $30,000–$50,000 a year. A term policy on the at-home parent is usually inexpensive and protects the working spouse from an impossible choice.
Why work coverage usually isn't enough
- It's often only 1–2 times your salary.
- It typically ends when you leave, are laid off, or retire — exactly when health changes may make new coverage harder to get.
- Extra "supplemental" coverage at work is often priced in five-year age bands and can become expensive as you age.
Treat work coverage as a bonus, and own a personal policy that follows you.
When to revisit your number
Recalculate after any big life change: marriage, a new baby, buying a home, a large raise, a divorce, or paying off the mortgage. Many families layer policies — for example, a 30-year term for the mortgage years and a 20-year term for the child-raising years — so coverage steps down as needs shrink.
Frequently asked questions
Is $500,000 of life insurance enough?
It depends. For a single parent earning $40,000 with a modest mortgage, it may be plenty. For a family with a $350,000 mortgage and two young children relying on a $90,000 income, it likely falls short. Run the DIME numbers.
Should I count my 401(k) when deciding how much life insurance I need?
You can count money your family would actually use, but many people leave retirement accounts out so the surviving spouse's retirement isn't drained to cover today's bills.
How much life insurance does a single person need?
If nobody depends on your income, you may only need enough to cover debts a co-signer would owe plus final expenses — sometimes $25,000 or less.
Can I have more than one life insurance policy?
Yes. Many people own several policies with different lengths. Insurers will ask about existing coverage so the total stays reasonable relative to your income.
Keep reading
General information only — not insurance, legal, tax or financial advice. Policy features and prices vary by insurer and state. Figures are estimates as of October 2026.