Short answer: A common starting point is 10 to 12 times your yearly income. A more accurate way is the DIME method: add up your Debts, Income to replace, Mortgage balance and Education costs. Then subtract savings and any coverage you already have.
Why the number matters
Too little coverage leaves your family making hard choices: selling the house, pulling kids out of school, or going back to work too soon. Too much coverage means paying for protection you don't need. The goal is a number that lets your family keep living their life if you're not here.
Method 1: Income replacement
Multiply your yearly income by the number of years your family would need it. Many people use 10 to 12 years.
Example: You earn $60,000 a year. 10 years of income is $600,000.
It's quick, but it ignores debts, the mortgage and future costs like college.
Method 2: The DIME method
Add up four things:
- Debt: car loans, credit cards, personal loans, plus about $10,000 to $15,000 for final expenses
- Income: your yearly income times the number of years your family would need it
- Mortgage: what's left on your home loan
- Education: what you'd want set aside for your kids' school
Example: $25,000 debt + $600,000 income + $250,000 mortgage + $100,000 education = $975,000.
Method 3: Subtract what you already have
Take your DIME total and subtract:
- Savings and investments your family could use
- Life insurance through work (remember, it may end if you leave the job)
- Any other policies you already own
What's left is your coverage gap.
Don't forget a stay-at-home parent
A parent who doesn't earn a paycheck still does work your family would have to pay for: childcare, driving, cooking, running the house. That parent needs coverage too.
Common mistakes
- Counting only work coverage, which is often just one or two times salary
- Forgetting the mortgage or future college costs
- Never updating coverage after a new baby, a new house or a raise
Term or permanent?
For most families with a mortgage and young kids, term life covers the biggest need for the lowest cost. Whole life or IUL can make sense for lifelong needs or cash value. Many families use a mix of both.
Have a question before you call?
Start with Jarvis, a free AI concierge open to the general public, and get answers in plain English. You can ask how much coverage might fit your family, right from your phone, with no app to download. When you're ready, a licensed Moving Mountains advisor takes it from there. Prefer a person right away? Call (813) 739-9877.
