One of the most common questions people ask when shopping for life insurance is: how much do I actually need? Too little and your family struggles. Too much and you're overpaying on premiums. Here's how to find the right number.
The Quick Rule of Thumb
The most commonly cited rule is 10–12 times your annual income. If you earn $70,000 per year, you'd want $700,000–$840,000 in coverage. This is a reasonable starting point — but it's just that, a starting point. Your actual needs may be higher or lower depending on your situation.
💡 The 10x rule is a quick estimate. For a more accurate number, use the DIME method below.
The DIME Method
DIME stands for Debt, Income, Mortgage, and Education. Add up each of these four categories to get a more personalized coverage target:
Calculate Your Coverage Need
Debt Add up all your debts excluding your mortgage — car loans, credit cards, student loans, personal loans. Your life insurance should cover these so your family isn't left with them.
Income Multiply your annual income by the number of years your family will need support — typically 10 years. This replaces the income your family depends on.
Mortgage Include the remaining balance on your mortgage so your family can stay in their home without financial strain.
Education Estimate the cost of college for each of your children. A good rule of thumb is $100,000–$150,000 per child for a 4-year degree.
Example Calculation
Let's say you earn $75,000/year, have $30,000 in debt, a $250,000 mortgage balance, and two kids you want to send to college:
- Debt: $30,000
- Income (10 years): $750,000
- Mortgage: $250,000
- Education (2 kids × $125,000): $250,000
- Total: $1,280,000
That might sound like a lot — but a $1.25 million Term Life policy for a healthy 35-year-old can cost as little as $60–$80/month.
Other Factors to Consider
- Stay-at-home spouses — even if a spouse doesn't earn income, their contributions have real financial value (childcare, household management). Cover them too.
- Inflation — the cost of living rises over time. Consider whether your coverage needs to account for this.
- Existing savings — if you have significant savings or investments, you may need less coverage.
- Final expenses — funerals can cost $10,000–$15,000. Make sure your coverage includes this.
Should You Ever Revisit Your Coverage?
Absolutely. Your coverage needs change as your life does. You should review your life insurance whenever you experience a major life event:
- Getting married or divorced
- Having or adopting a child
- Buying a home
- A significant change in income
- A child graduating college or becoming financially independent
- Paying off major debts
Not sure what number is right for you? Book a free 30-minute consultation and an Eterna agent will walk you through the calculation based on your specific situation — no cost, no pressure.
Let's Find Your Number Together.
A free consultation with a licensed Eterna agent takes 30 minutes and gives you a clear, personalized coverage recommendation.