How much life insurance do I need?

The short answer

Take your gross annual income, multiply it by the number of years your family would need that income replaced, then add every debt you would leave behind plus the cost of getting each child through college. Subtract existing savings and any group coverage that would still be in force. That result, rounded up to the next $250,000, is your target death benefit.

For most households with young children the answer falls between $750,000 and $2 million. That sounds like a lot until you price it. NerdWallet’s rate data, valid as of August 1, 2026, puts a $500,000 20-year level term policy at $321 a year for a healthy 40-year-old man in the Preferred Plus class and $278 a year for a woman the same age, and the site pegs the average cost of life insurance at $26 a month. Coverage is almost always cheaper than people guess: LIMRA and Life Happens found in the 2025 Insurance Barometer Study that adults ages 18 to 30 overestimate the cost of a $250,000 20-year term policy by roughly 10 to 12 times.

Use the calculator for a fast first pass, then read on and pressure-test the number with the DIME method below.

The DIME method, step by step

DIME stands for Debt, Income, Mortgage, Education. It is the method most independent agents actually use because it produces a defensible number instead of a rule of thumb.

• Debt. Add every non-mortgage balance: car loans, credit cards, student loans (federal loans are usually discharged at death, private loans with a cosigner often are not), medical bills, and roughly $8,000 to $15,000 for a funeral and estate settlement costs.
• Income. Multiply your gross income by the years of replacement your family needs. Until the youngest child finishes school is the usual anchor. A 34-year-old with a newborn is looking at 22 years.
• Mortgage. Use the current payoff balance, not the original loan amount. Add rent for two to three years instead if you do not own.
• Education. Budget per child. A four-year in-state public degree is commonly planned at $110,000 to $140,000 for a child starting college a decade from now; private colleges run two to three times that.

Then subtract your offsets: liquid savings and taxable investments, 529 balances, and employer group life. Texas Department of Insurance guidance notes that basic group coverage through an employer usually equals one or two times annual salary, which is real money but disappears the day you change jobs, so many advisers count only half of it.

The 10x income rule, and when it fails

The 10x rule says buy ten times your gross income. It is popular because it is easy and because it is roughly right for a mid-career earner with a mortgage and two school-age children. It fails in three predictable directions.

It under-buys for young parents. Ten times income for a 30-year-old earning $85,000 is $850,000, but that family needs 22 years of income replacement plus college for two children. A DIME run frequently lands closer to $1.5 million.

It over-buys for people near the finish line. At 58 with the house paid off, the kids launched and $1.4 million in retirement accounts, ten times income is mostly wasted premium. A smaller 10-year policy covering the last stretch of earnings is the better trade.

It ignores the non-earning parent entirely. Zero income times ten is zero, which is obviously wrong. See the stay-at-home section below.

Use 10x as a sanity check on your DIME total. If DIME says $600,000 and 10x says $1.1 million, go find out which input is off.

Three worked examples

Every figure below is a DIME calculation with the offsets subtracted. Premiums use the Insurance Geek March 2026 rate survey of 30-plus carriers for a Preferred Plus non-tobacco applicant on a 20-year level term.

1. Young family, one earner carrying the load. Ages 32 and 31, one child age 1, household income $95,000 from a single earner, $310,000 mortgage, $22,000 in car and student loan debt, $18,000 saved, $150,000 group life. Income replacement of 21 years at $95,000 is not realistic to fully fund, so this family uses 15 years: $1,425,000, plus $310,000 mortgage, plus $22,000 debt, plus $12,000 final expenses, plus $120,000 education, minus $18,000 savings, minus half the group life. Target: $1.8 million on the earner. At $1 million of 20-year term a 32-year-old man pays roughly $29 a month in the Insurance Geek data, so $1.8 million lands near $50 a month.

2. Dual-income couple, two kids, no college plan yet. Ages 38 and 40, incomes $88,000 and $102,000, children 6 and 9, $395,000 mortgage, $31,000 debt, $140,000 in savings and retirement they would spend, no 529. Each parent needs their own income replaced for about 13 years. That produces roughly $1.5 million on the $102,000 earner and $1.35 million on the $88,000 earner, with the mortgage and education split between the two policies. On Insurance Geek’s 2026 table a 40-year-old woman pays $39.92 a month for $1 million and a 40-year-old man pays $48.18, so the pair covers itself for well under $110 a month combined.

3. Empty nesters winding down. Ages 57 and 59, combined income $165,000, no mortgage, no dependents, $1.6 million invested, one adult child. The remaining exposure is the seven years of savings contributions still needed before retirement, plus a modest legacy. A pair of $400,000 10-year term policies covers it. At 60 the Insurance Geek survey shows $500,000 of 20-year term at $199.32 a month for a man; a 10-year policy at $400,000 costs considerably less because the term is shorter.

How much for a stay-at-home parent

A stay-at-home parent generates no paycheck and an enormous amount of replaceable labor. Price the labor. Full-time infant care runs $12,000 to $28,000 a year depending on metro area, and that is before after-school care, transportation, household management and the income the surviving parent loses by cutting back hours.

The practical approach: total the replacement services the surviving parent would have to buy, multiply by the years until the youngest child is roughly 13, and add final expenses. For a household with a 2-year-old and a 5-year-old that usually lands at $400,000 to $750,000.

Two constraints to know. Most carriers will not issue a non-earning spouse more coverage than the working spouse carries, and many cap a non-earning spouse somewhere between $500,000 and $1 million without a financial justification letter. Buy both policies at the same time and the underwriter usually asks fewer questions.

How much term length to buy

Coverage amount and coverage duration are separate decisions, and duration is where people quietly lose money by guessing.

Two structural notes. Laddering, meaning a $500,000 30-year policy stacked with a $500,000 15-year policy, gives you $1 million now and $500,000 later for less than $1 million of 30-year coverage. And check the conversion privilege before you sign: the Texas Department of Insurance notes that carriers typically allow conversion from term to permanent coverage only for a limited window, often until about age 65, and never after the term expires.

Five mistakes that wreck the number

Counting group life as permanent. It ends when the job ends, usually with no portability worth having.

Using take-home pay instead of gross. Your family replaces gross income, because they still owe taxes on whatever they earn or withdraw.

Forgetting the surviving parent’s career hit. Someone has to handle school pickup. Assume a 20% to 30% income reduction for several years and fund it.

Ignoring inflation over a 25-year term. At 2.5% annual inflation, $1 million of coverage bought today has roughly the purchasing power of $540,000 in year 25. Buying 15% to 20% more than your calculated number is cheaper than adding a policy at 45.

Waiting. Premiums are priced off age and health, and both move in one direction. The gap between the Preferred Plus and Standard classes is real money: Insurance Geek’s 2026 data shows a 40-year-old paying $28.03 a month at Preferred Plus versus $54.08 at Standard for the same $500,000 policy, a 93% difference.

When you have your number, run it through the quote funnel and compare what several carriers will actually issue. Availability, rate classes and policy forms vary by state.