Last updated: October 2026

How much life insurance do I need?

The most expensive life insurance mistake isn't buying the wrong company - it's buying the wrong amount. Too little leaves your family exposed; too much wastes money every month for decades. Here's how to size it right.

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The DIME method, explained

Financial educators often use the DIME formula - Debt, Income, Mortgage, Education. Add up everything except the mortgage, add the mortgage separately (it's usually the biggest number), then subtract what you already have:

• Debt: credit cards, car loans, student loans - everything except the mortgage.
• Income: annual income times the years your family would need it (10-15 is common).
• Mortgage: the remaining balance, so the house is safe.
• Education: future college costs per child, if that's a goal (often estimated at $100K-$250K per child in today's dollars).

Then subtract existing savings, investments, and any life insurance you already own (including workplace coverage). The calculator above does exactly this math.

A worked example

Take a hypothetical family: two parents, ages 34 and 32, two kids (4 and 1), household income $140,000, $320,000 mortgage balance, $25,000 in other debts, $60,000 in savings, and $100,000 of workplace life insurance:

• Income replacement: $140,000 x 12 years = $1,680,000
• Debts including mortgage: $345,000
• College top-up: $150,000 (partial goal, two kids)
• Minus savings: -$60,000
• Minus existing coverage: -$100,000
• Suggested coverage: roughly $2,015,000 - rounded to $2M and split across both parents by income and caregiving roles.

Rounding to real products: insurers sell standard tiers - $250K, $500K, $750K, $1M, $1.5M, $2M - so a calculated $2,015,000 becomes a $2M policy in practice. When between tiers, round up rather than down: the premium gap between adjacent tiers is small (often $5-$15/month), while the coverage gap from rounding down lasts for decades. One more line item people miss: co-signed private student loans. Co-signed debt does not die with you, so add those balances to the debt side - protecting your co-signer is part of protecting your family.

Notice how income replacement and the mortgage dominate. Small assumption changes move the total by hundreds of thousands - which is why running the numbers beats gut instinct.

Should you count Social Security survivor benefits?

Surviving spouses with children under 16 (or disabled children) can receive Social Security survivor benefits - often $2,000-$3,500/month depending on the worker's earnings record. That's real money, but treat it as a cushion, not a plan: benefit formulas change, the amounts rarely cover a full household budget, and eligibility rules have fine print (remarriage before 60, for example, can end benefits). Most planners suggest running your coverage number without survivor benefits, then treating them as a welcome buffer. Conservative math on a safety net is a feature, not a bug.

Common sizing mistakes

• Counting only the mortgage. It's the biggest single number, but 10-15 years of income replacement is usually larger.
• Forgetting inflation. $1M in 20 years buys meaningfully less than $1M today. Padding the income-replacement years slightly is reasonable.
• Ignoring the second parent. The most skipped line item in family coverage - see the stay-at-home section above.
• Setting it and forgetting it. Revisit every few years: kids grow, mortgages shrink, and a second child changes everything.

The 10-15x rule of thumb

If you want a fast answer: most advisors suggest 10 to 15 times your annual income as a starting point. A $100,000 earner lands at $1M-$1.5M. It's rough, but it beats the most common real-world number - which is whatever round figure felt comfortable, usually far too low.

Don't forget the stay-at-home parent

If one parent doesn't earn a paycheck, the family still needs coverage on their life. Price out what full-time childcare, housekeeping, and household management would cost to replace - it often totals $50,000-$100,000+ per year. Insuring the stay-at-home parent for $500K-$1M is standard advice, not extravagance.

How term length interacts with the amount

Coverage amount and term length answer different questions: how much and how long. A common mistake is getting one right and the other wrong - $2M for 10 years when the mortgage runs 28, or $250K for 30 years when the real need was seven figures for two decades. Size them independently:

• Amount comes from the DIME math above - debts, income replacement, education, minus assets.
• Term comes from the timeline - years until the mortgage is paid, years until the youngest is independent, years until retirement savings stand alone. Take the longest.

When the two point in different directions (big amount, short timeline), consider laddering: a large 20-year policy for the kid years plus a smaller 30-year policy for the mortgage tail. You stop paying for coverage you no longer need instead of carrying one oversized policy for three decades.

Revisit every few years

Coverage needs shrink as the mortgage shrinks and kids grow - and grow when you buy a house or have another child. Revisit the math every 2-3 years or after any big life change. (This is also where flexible policies like Ladder's adjustable coverage earn their keep - see our company comparison.)

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