The Quick Rule: 10–12x Your Income
The most common rule of thumb is to carry 10 to 12 times your annual income in life insurance coverage. If you earn $75,000/year, that means $750,000 to $900,000 in coverage.
This rule works well as a starting point, but it doesn't account for your specific debts, dependents, or assets. For a more precise number, use the DIME method below.
The DIME Method (More Accurate)
DIME stands for Debt, Income, Mortgage, and Education. Add these four numbers together for a personalized coverage estimate:
Debt — All debts except your mortgage
Credit cards, car loans, student loans, personal loans, medical debt. Your life insurance should cover these so your family isn't left with them.
Income — Your annual income × years until retirement
If you earn $80,000/year and have 25 years until retirement, that's $2,000,000 in income replacement. Many people use 10 years as a simplified figure.
Mortgage — Your remaining mortgage balance
The full payoff amount so your family can keep the home without the monthly payment burden.
Education — Future education costs for your children
Estimate $100,000–$200,000 per child for a 4-year college education in 2026 dollars, depending on your goals.
Example DIME calculation: Debt $25,000 + Income ($80K × 10 years = $800,000) + Mortgage $280,000 + Education (2 kids × $150K = $300,000) = $1,405,000 in recommended coverage.
Coverage by Life Situation
| Situation | Recommended Coverage |
|---|---|
| Single, no dependents, no debt | $100,000 – $250,000 (final expenses only) |
| Married, no kids, dual income | $250,000 – $500,000 (mortgage + debt) |
| Married, 1–2 kids, single income | $750,000 – $1,500,000 |
| Married, 3+ kids, single income | $1,000,000 – $2,000,000 |
| Married, kids, dual high income | $500,000 – $1,000,000 each |
| Retired, no dependents | $50,000 – $250,000 (final expenses/estate) |
What to Subtract From Your Coverage Need
Your coverage need is reduced by assets your family would already have:
- Existing savings and investments
- Existing life insurance through your employer
- Spouse's income and savings
- Social Security survivor benefits (for families with minor children)
If your DIME calculation comes to $1,200,000 but you have $300,000 in savings and $200,000 in employer coverage, your additional needed coverage is $700,000.
How Long Should Your Term Be?
Choose a term length that covers your longest financial obligation:
- 20-year term — most popular, covers young children through college and most of a mortgage
- 30-year term — ideal if you have young children and a new 30-year mortgage
- 10-year term — good for a specific debt or if you're closer to retirement
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