Life·6 min read

How Much Life Insurance Do I Actually Need?

Most people are dramatically underinsured. Here's the simple math (DIME method) for figuring out the right death benefit for your family.

Key Takeaways

1
The DIME method (Debt + Income + Mortgage + Education) gives you a baseline.
2
Most experts recommend 10–15× your annual income as a starting point.
3
Stay-at-home parents need coverage too — replacement-care costs are real.
4
Term life is dramatically cheaper than whole life for the same death benefit.

The DIME method

DIME stands for Debt + Income + Mortgage + Education. Add all four and you get a starting death benefit that covers what your family would actually need.

Example: $20K debt + ($60K income × 10 years) + $250K mortgage + ($100K × 2 kids in college) = $1,070,000 death benefit.

Why 10–15× income is the rule of thumb

If your spouse invests the death benefit at a conservative 4–5% return, 10× your income produces roughly your annual paycheck in dividends — so they don't have to touch principal to maintain their lifestyle.

Younger families with more years of earnings ahead should lean toward 15×; near-retirees with paid-off mortgages can lean toward 5–7×.

Stay-at-home parent coverage

If a stay-at-home parent passes away, the surviving spouse needs to pay for childcare, housekeeping, transportation, and meal prep that the late spouse provided. Realistically: $40K–$70K/year.

Most carriers approve $250K–$500K in term life on a stay-at-home parent without requiring proof of income.

Frequently Asked

What if my employer already provides life insurance?+

Group life through work is usually 1–2× salary — far less than the 10–15× most families need. It also typically ends when you leave the job. Use group coverage as a supplement, not your main protection.

Should I buy whole life for the cash value?+

Generally no. For the same monthly premium, term life buys 5–10× more death benefit. Invest the difference in a Roth IRA or 401(k) for stronger long-term returns.

Life