Life Insurance Needs Calculator
Estimate the coverage your family needs to remain financially secure.
How to Calculate Your Life Insurance Needs
Choosing the right life insurance coverage is one of the most critical financial decisions you will make. While many financial advisors suggest a "rule of thumb" of 10 times your annual salary, a more accurate approach involves the DIME Method (Debt, Income, Mortgage, Education).
Our Life Insurance Needs Calculator uses a comprehensive formula to ensure your family can maintain their current lifestyle, pay off all liabilities, and fund future goals like a college education.
The DIME Formula Explained
- Debt & Final Expenses: Sum up all credit card debt, car loans, and add an average of $15,000 for funeral costs.
- Income Replacement: Determine how many years your family will rely on your paycheck. Multiply your annual salary by that number of years.
- Mortgage: Include the total payoff amount of your home loan so your family can stay in their home debt-free.
- Education: Estimate the cost of tuition and board for your children.
Sarah earns $75,000 and wants to provide 10 years of income ($750,000). She has a $200,000 mortgage and $20,000 in other debts. She wants to set aside $100,000 for her child's college. She currently has $30,000 in savings.
Calculation: ($750k + $200k + $20k + $15k + $100k) – $30k = $1,055,000 in required coverage.
Why You Shouldn't Rely Solely on Employer Policies
Many people have life insurance through their employer, often valued at 1x or 2x their salary. While this is a great benefit, it is rarely enough for a family with a mortgage and children. Furthermore, employer-sponsored life insurance is usually not portable, meaning if you leave your job, you lose your coverage.
Frequently Asked Questions
Is term life or whole life better?
For most families, Term Life insurance is the most cost-effective way to get the high levels of coverage indicated by this calculator during their peak "vulnerability" years (while raising kids and paying a mortgage).
Should I include my spouse?
Yes. Even if a spouse does not earn a traditional income, "Stay-at-Home" parents provide vital services (childcare, transportation, household management) that would be very expensive to replace.