The most common advice is “get 10 times your salary.” That's a fine starting point, but it ignores your actual financial picture: your debts, your kids' education costs, your spouse's income, and what your family would actually need if you weren't here.
Here's a more practical formula called DIME that gives you a realistic number.
The method
The DIME formula
Add up these four categories to estimate how much coverage your family would need.
Debt & final expenses
Add up your mortgage balance, car loans, student loans, credit cards, and estimated funeral costs (the NFDA's 2023 study put the median funeral with viewing and burial at $8,300, closer to $10,000 with a vault). This is what needs to be paid off immediately.
Income replacement
Multiply your annual income by the number of years your family would need support. Common range: 10-20 years depending on your kids' ages and your spouse's earning capacity.
Mortgage
If paying off the mortgage is a priority (it usually is), include the remaining balance. Your family shouldn't lose their home on top of losing you.
Education
If you plan to help fund your children's education, four years currently averages roughly $120,000 at an in-state public university and about $250,000 at a private one (College Board 2024-25 average annual costs).
Worked example
Example calculation
- Mortgage balance
- $280,000
- Other debts + final expenses
- $45,000
- Income replacement (15 years x $75,000)
- $1,125,000
- College for 2 kids
- $250,000
- Less: existing savings/investments
- -$150,000
- Coverage needed
- $1,550,000
In this scenario: as of August 2026, a $1.5 million 20-year term policy for a healthy 35-year-old man in New Jersey (Preferred non-tobacco) started at about $60 a month in our comparison. An example, not a quote, and less than most people expect.
Pitfalls
Common mistakes when choosing coverage
- Only getting what your employer offers
- Most employer plans provide 1-2x your salary. That's rarely enough, and it disappears if you leave the company.
- Underestimating future costs
- College costs, inflation, and childcare are easy to underestimate. It's better to slightly over-insure than leave your family short.
- Waiting too long
- Every year you wait, premiums go up. And if your health changes, coverage can become much more expensive or unavailable. The best time to buy is when you're young and healthy.
Policy type
What type of policy should you get?
For pure income replacement and debt coverage, term life insurance is almost always the answer. It gives you the most coverage for the lowest cost during the years that matter most. See the full life insurance breakdown for details on all policy types.
FAQ
Common questions
- Is 10 times my salary enough life insurance?
- The 10x rule is a starting point, not a final answer. It doesn't account for your specific debts, future college costs, existing savings, or your spouse's income. Some families need more, some need less. The DIME formula gives you a more accurate number.
- Does my spouse need life insurance too?
- Yes, if your household depends on their income or if they provide services (like childcare) that would cost money to replace. Even a stay-at-home parent should be considered for coverage because replacing those services is expensive.
- Should I get life insurance through my employer?
- Employer life insurance is usually 1-2x your salary, which is rarely enough. It also doesn't follow you if you leave the job. It's a good supplement, but most people need an individual policy for adequate coverage.