How Much Life Insurance Do You Need?
Rules of thumb get you to the right order of magnitude. Your balance sheet gets you to the right number.
At a glance
Figures checked 1 Sep 2026
What to take away
- DIME: Debt, Income replacement, Mortgage, Education — minus what you already have.
- Include the cost of replacing unpaid work such as childcare, which is often $15,000–$30,000 a year.
- Employer group coverage counts toward your total but disappears with the job.
Start with the four buckets, add them, then subtract existing coverage and liquid savings. What is left is the gap a policy needs to fill.
D — debts and final expenses
Credit cards, car loans, private student loans, and a realistic funeral figure. Federal student loans are discharged on death; most private ones are not, and a co-signer stays liable.
I — income replacement
Decide how many years of your income the household would need. Until the youngest child is eighteen is a common anchor. Multiply after-tax income by that number of years.
M — mortgage
The outstanding balance, not the original loan. Paying off the house removes the largest fixed cost a surviving partner faces.
E — education
What you intend to fund, per child. Be honest about whether that is four years of an in-state public university or something larger.
People consistently forget the value of unpaid labour. If one parent runs the household, replacing that work with paid childcare and services is a real, ongoing cost that belongs in the income line.
Common questions
It is a fair starting estimate for a typical household and can be badly wrong at the edges. A high earner with no mortgage and grown children may need far less; a moderate earner with three young children and a large mortgage may need more.
If both incomes matter to the household, yes. If one partner does most of the unpaid work, that partner should also be covered, because replacing that work costs money.