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The four-part method
Many planners call this DIME.
- Debt: everything you owe apart from the mortgage, plus final expenses
- Income: your yearly income multiplied by the years your family would need it
- Mortgage: the balance needed to pay off the home
- Education: what you want to set aside for children's schooling
Then subtract what you have
Take away savings, existing life insurance and anything else your family could draw on. Be cautious about counting coverage through work, because it normally ends when the job does.
How the answer changes with age
Parents with young children and a new mortgage usually have the largest need and cover it with term insurance. Empty nesters with a paid-down home often need much less. Retirees frequently want only enough to cover final expenses and leave something behind.
Do not let the perfect number stop you
Some coverage in force beats an ideal policy you never buy. If the full amount is out of reach, cover the most urgent needs first, such as income for the next few years and final expenses, and add more later.
Common questions
Is ten times my income the right amount?
It is a rough starting point. It ignores your debts, your savings and how many people depend on you, so run your own numbers.
Should a stay-at-home parent have coverage?
Usually yes. Replacing childcare and household work costs real money even though no paycheck is lost.
This page is general information, not insurance, legal or tax advice. Policy terms, eligibility and pricing vary by insurer and state. A licensed insurance agent can explain the specific products they offer.