Most people either dramatically underestimate or over-buy life insurance. Here's how to calculate what you actually need — with a framework used by financial planners, and our free calculator.
Why Most People Get This Wrong
Life insurance needs are deeply personal and depend on factors that generic rules ("buy 10x your income") can't capture. Age, existing savings, a spouse's income, number of children, and outstanding debts all matter significantly.
The DIME Method
The DIME method (Debt, Income, Mortgage, Education) is a widely used starting framework: add up your total debts, income replacement need (annual income × number of years you want to replace), mortgage balance, and estimated education costs for each child.
How Life Stage Affects Your Needs
- Young single, no dependents — Minimal or no life insurance needed.
- Married, no children — Consider enough to cover debts and support your spouse for 2–5 years.
- Young family — Highest coverage need; income replacement + mortgage + education costs.
- Established family, significant savings — Coverage needs decrease as savings grows.
- Pre-retirement — Coverage may be primarily for estate planning or final expenses.
Factoring in Existing Assets
Life insurance fills the gap between your family's financial needs and your existing assets (savings, investments, spouse's income). Run the DIME calculation, then subtract liquid assets your family could access.
