The wrong answer is "whatever the policy comes with." The right answer depends on your income, your debts, your dependents, and what kind of future you want to protect. Here's how to figure it out.
Too many families end up with a $100,000 policy — not because that's what they need, but because someone suggested it or the premium felt manageable. A $100,000 payout sounds significant until you realize it represents roughly two years of a median American household income. A surviving spouse with children often needs the equivalent of 10 or more years of income to stabilize, not two.
Underinsurance is one of the most common financial planning mistakes in America. The goal isn't to pick the cheapest number — it's to pick the right number for what your family would actually need.
DIME stands for Debt, Income, Mortgage, and Education. Add these four numbers together and you have a solid baseline for how much coverage to consider.
D — Debt
All outstanding debts outside of your mortgage: car loans, student loans, credit cards, medical bills, business obligations. Total everything your family would inherit.
I — Income
Multiply your annual income by the number of years your family would need support — typically 10 to 15 years for a family with young children. This is the income-replacement core of your coverage.
M — Mortgage
The remaining balance on your home mortgage. Many families want a surviving spouse to stay in the home without the pressure of a mortgage payment. Include this separately from other debts.
E — Education
Estimated college or trade school costs for each child. Even a partial provision — $50,000 per child — can make the difference between options and no options for the next generation.
Example: $25,000 debt + ($70,000 × 12 years income) + $180,000 mortgage + $100,000 education = $1,145,000 in coverage.
That sounds like a lot. Term life insurance at that amount for a healthy 35-year-old is often $60–$80/month. The cost of not having it is measured in family stability.
A single parent with three young children needs far more coverage than someone whose children are grown and mortgage is paid off. Map out how long your family would realistically depend on your income before they could fully stand on their own.
A dual-income household absorbs a loss differently than a single-income family. If your spouse earns an income, the gap your death creates is narrower — though the adjustment period is still significant, especially with children.
If you have substantial savings, investments, or real estate equity, subtract those from your coverage need. Life insurance bridges the gap between what your family has now and what they'd need — not a replacement for savings already built.
Funeral and burial costs average $8,000–$12,000. If you want to leave a gift to a church, charity, or specific individual, add that to your total. Some people use life insurance intentionally to pass on wealth, not just replace income.
Your coverage need isn't static. Revisit it when you:
Life changes. Your coverage should keep up with it.
That's exactly what a free consultation is for. Tell me your situation — income, debts, dependents, goals — and I'll walk you through what coverage actually makes sense. No pitch, no pressure.
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