By the CoverCalc Editorial Team · Updated June 2026 · Researched from authoritative sources. General information, not professional advice.
The honest answer depends on a handful of numbers from your own life, not a one-size-fits-all multiple. This guide walks through a method you can do on paper in fifteen minutes, shows a full worked example, and covers the offsets — savings, existing coverage, and Social Security survivor benefits — that most quick calculators quietly ignore.
"Buy ten times your income" is easy to remember, which is exactly why the industry repeats it. But it is a slogan, not a calculation. It ignores your debts, your existing savings, how many years your family actually needs support, and what your children's education will cost. Two people earning $80,000 can have completely different real needs: one is a renter with no kids and a working spouse; the other has a $320,000 mortgage, two toddlers, and a spouse who stays home. A flat multiple tells both of them "$800,000," and it is wrong for both.
The National Association of Insurance Commissioners (NAIC), the body that coordinates U.S. state insurance regulators, publishes consumer guidance recommending a needs-based analysis rather than a rule of thumb. The most widely used needs framework is DIME.
DIME stands for Debt, Income, Mortgage, and Education. You add up what your death would leave unfunded, then subtract what already exists to cover it.
Then subtract your liquid assets and existing coverage: savings, investments outside retirement accounts you would want to preserve, and any group life insurance you already have through work.
Maria Reyes earns $85,000. Her husband Daniel earns $40,000 part-time and is the primary caregiver for their two children, ages 4 and 7. Here is Maria's DIME calculation:
| Component | Amount | How it was figured |
|---|---|---|
| Debt + final expenses | $35,000 | $20,000 car/credit + $15,000 funeral & estate costs |
| Income replacement | $850,000 | $85,000 × 10 years until the youngest is ~17 |
| Mortgage | $290,000 | Remaining balance |
| Education | $200,000 | ~$100,000 per child |
| Subtotal need | $1,375,000 | |
| Less: savings & investments | −$120,000 | Emergency fund + brokerage |
| Less: group life at work | −$170,000 | 2× salary employer policy |
| Coverage gap | $1,085,000 | Round to a $1,000,000–$1,100,000 term policy |
Notice how different this is from "10x income," which would have suggested $850,000 — under-insuring the Reyes family by roughly a quarter of a million dollars once the mortgage and education are counted.
If you have worked and paid into Social Security, your minor children and a caregiving spouse may qualify for monthly survivor benefits administered by the Social Security Administration (SSA). These can be meaningful — sometimes well over $1,000 per child per month — and they reduce the income gap life insurance has to fill. You can review your family's potential survivor amounts in your personal my Social Security statement at ssa.gov. Because the rules and amounts change and depend on your earnings record, treat them as a partial offset rather than a substitute for coverage, especially since children's benefits typically stop at age 18 (or 19 if still in high school).
There are two defensible ways to size income replacement. The needs-based approach (used above) replaces income only for the years of dependency. The human life value approach replaces the full present value of your future earnings to retirement, which produces a larger number and is common when an insurer or advisor is paid on the policy size. For most families, a needs-based figure that gets everyone to independence with the house paid off and college funded is both sufficient and far more affordable.
Match the term length to the years your family is dependent. A 35-year-old with young children often buys a 20- or 30-year term. If your need is large now but will shrink as debts fall and savings grow, consider laddering: instead of one $1,000,000 30-year policy, buy a $500,000 30-year policy plus a $500,000 15-year policy. For the first 15 years you carry $1,000,000; after that, when the mortgage is smaller and the kids are nearly grown, you keep $500,000 at a lower combined premium. Laddering can cut total lifetime premiums by a meaningful margin while matching coverage to actual need.
Industry research from LIMRA, an insurance research association, consistently finds that a large share of U.S. adults are either uninsured or significantly underinsured relative to a needs-based calculation. The most common error is not buying nothing — it is buying a round, comfortable-feeling number (often the employer's 1–2× salary group policy) and assuming it is enough. Run the DIME math before you anchor on a figure.
One reassuring point: term life is cheap precisely because most policies never pay a claim during the term. A healthy person in their 30s can often cover a seven-figure 20-year term for a price comparable to a phone bill. The death benefit itself is generally received income-tax-free by beneficiaries under Internal Revenue Code §101(a), so the face amount you choose is, in most cases, the amount your family actually receives.
Size your policy around the gap your death would create. If your spouse earns well and would keep working, your income-replacement years can be shorter. If your spouse is a caregiver or would need to reduce hours, plan for a longer replacement period — and insure the caregiver too (see our guide on coverage for stay-at-home parents).
Yes, subtract it — but cautiously. Group life is typically not portable; if you leave the job, the coverage usually ends. Many people treat employer coverage as a bonus layer and buy a personal term policy for the bulk of the need so it follows them between jobs.
A modest cushion is sensible because rebuying coverage later, at an older age or after a health change, costs more. But there is little benefit to buying two or three times your calculated need; that money is usually better invested.
After any major change: a new child, a home purchase, a large raise, paying off significant debt, or a divorce. Coverage needs typically peak in your 30s and 40s and decline as debts shrink and savings grow.
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