Life Insurance Needs Calculator
Estimate the coverage amount your family needs to remain financially secure.
Your Estimated Coverage Need:
How Much Life Insurance Do You Actually Need?
Determining your life insurance requirements is one of the most critical financial decisions you will make. While a common rule of thumb suggests 10 times your annual salary, this generic approach often ignores specific financial obligations like mortgages, private education costs, and existing debt.
The DIME Method Explained
Experts often recommend the DIME method for a more accurate calculation:
- Debt: Calculate all your outstanding debts excluding your mortgage.
- Income: How many years would your family need to replace your salary?
- Mortgage: Include the total payoff amount for your home.
- Education: Estimate the cost of sending your children to college.
Real-World Example Calculation
Imagine a breadwinner earning $75,000 annually who wants to provide 15 years of support. They have a $300,000 mortgage and $50,000 in a college fund goal. If they have $40,000 in existing savings, the math looks like this:
($75,000 x 15) + $300,000 + $50,000 – $40,000 = $1,435,000 total coverage.
Inflation and Interest Considerations
This calculator provides a baseline "lump sum" estimate. When you purchase a policy, remember that your beneficiaries might invest the payout. However, with inflation increasing the cost of living, it is generally safer to aim for a slightly higher coverage amount than a lower one to ensure long-term stability.