How much life insurance do I need?

This answer is about Life insurance.

Start with a needs-based estimate, not a rule of thumb

Rules of thumb like 10–12 times income (confirm for your situation) are quick, but they can dramatically over- or under-insure a household. A needs analysis asks a more useful question: if you died tomorrow, how much money would your family actually need to stay financially whole?

The DIME formula

• D — Debt: total non-mortgage debts (car loans, credit cards, student loans, medical).
• I — Income: years of income replacement your dependents would need (often until the youngest child is independent).
• M — Mortgage: the outstanding balance on your home so the family can stay put.
• E — Education: expected future college or other education costs for children.

Then subtract what you already have

From that total, subtract liquid savings, existing life insurance (including any group coverage through work), and, where applicable, the expected present value of Social Security survivors benefits your family would receive. Social Security survivor benefits can offset part of the need but rarely replace a full paycheck.

Practical checks

• Revisit coverage after major life events: marriage, a new child, a home purchase, or a large income change.
• Consider whether a stay-at-home spouse also needs coverage (their replacement cost — childcare, household work — is real).
• For business owners: add buy-sell funding and key-person coverage as separate needs.

Educational information, not personalized financial advice. A licensed advisor can walk through a full needs analysis for your household.