How Much Life Insurance Do You Actually Need?

Too many families are underinsured — and some pay for far more than they need. Here's a clear framework for calculating the right amount of coverage.

It's one of the most common questions we hear, and one of the most misunderstood. Buy too little coverage and you leave your family exposed. Buy too much and you waste money on premiums that could serve you better elsewhere.

A helpful starting point is the DIME method — an acronym for the four things life insurance should typically cover:

Debt: All outstanding debts other than your mortgage, including credit cards, car loans, and personal loans.

Income: Your annual income multiplied by the number of years your family would need support — often until your youngest child is financially independent.

Mortgage: The remaining balance on your home, so your family can stay in it without financial strain.

Education: The projected cost of education for your children.

Add these together and you have a realistic baseline. From there, we refine the number based on existing savings, other coverage, and your specific goals.

The old rule of thumb — "buy 10 times your income" — is a rough guide at best. Every family is different. A single-income household with three young children and a large mortgage has very different needs than a dual-income couple nearing retirement.

The right amount of coverage is the amount that lets your family maintain their standard of living and reach their goals even if you're no longer there to provide. Getting that number right is worth the conversation.