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The right amount of life insurance depends on what your death would leave behind financially for the people who depend on you. Generic rules of thumb (“10x your salary”) give you a starting point but not precision. Here is how to calculate your actual number.
Who Needs Life Insurance
Life insurance replaces income that dependents would lose if you died. You need it if:
- You have a spouse or partner who depends on your income
- You have children who need financial support
- You have co-signed debt a survivor would be responsible for
- Someone relies on your unpaid labor (childcare, household management) that would cost money to replace
You probably do not need life insurance if you are single with no dependents, your spouse earns enough independently, or your children are financially self-sufficient adults.
The DIME Formula
A practical framework that calculates your coverage need:
D — Debt: All outstanding debts your family would inherit: mortgage balance, car loans, student loans, personal loans, credit card debt. Add the full remaining balance on each.
I — Income: How many years of income replacement your family needs, multiplied by your annual income. A family with young children typically needs 10-15 years of income replacement. A family with older children and a working spouse might need 5-7 years.
M — Mortgage: If not already included in Debt, the full remaining mortgage balance. Your family should be able to pay off the house without your income.
E — Education: Estimated college costs for each child. Current 4-year public university cost: approximately $140,000 including room and board. Private: $240,000+. Multiply by number of children who have not yet finished college.
Add D + I + M + E. Subtract any existing savings or assets your family could use. The result is your coverage need.
Example Calculation
35-year-old with a spouse and two children (ages 5 and 8), household income $95,000/year, mortgage balance $280,000:
| Component | Amount |
|---|---|
| Debt (excluding mortgage): car loan + credit cards | $35,000 |
| Income replacement: $95,000 x 12 years | $1,140,000 |
| Mortgage balance | $280,000 |
| Education: 2 children x $140,000 | $280,000 |
| Total need | $1,735,000 |
| Minus existing savings and investments | -$85,000 |
| Recommended coverage | $1,650,000 |
A $1,000,000 policy — which many people consider a lot — would be insufficient for this family by more than $600,000.
What a $1,000,000 Policy Costs in 2026
For a healthy non-smoking 30-year-old:
- 20-year term, $1,000,000: $40-$55/month male, $35-$45/month female
- 30-year term, $1,000,000: $60-$80/month male, $50-$65/month female
Life insurance is priced primarily on age and health. The younger and healthier you are when you buy, the lower your premium for the policy’s entire term. Waiting 5 years to buy a 20-year term policy at 35 instead of 30 typically costs 25-35% more per month for the same coverage.
The Stay-at-Home Parent Problem
Stay-at-home parents provide labor with significant economic value: childcare, cooking, transportation, household management. If a stay-at-home parent died, the working spouse would need to pay for these services. The replacement cost of full-time childcare and household management for two children is $30,000-$60,000/year in most markets.
Stay-at-home parents need life insurance based on the cost to replace their labor, not just their earned income (which may be $0). A $500,000-$750,000 policy is often appropriate for a stay-at-home parent with young children.
Where to Buy
Online term life insurance marketplaces let you compare quotes from multiple carriers in minutes without speaking to an agent. Policygenius, Haven Life, and Ladder all offer price comparison and same-day coverage for healthy applicants. Traditional agent-sold policies are appropriate for people with health conditions who need more complex underwriting.
Sources: LIMRA life insurance needs analysis; Insurance Information Institute; Policygenius term life rate data 2026. This article is for informational purposes only and does not constitute insurance or financial advice.
