How to use this calculator
Enter your annual income, how many years your family would need that income, your mortgage balance, other debts, the college costs you want to cover and the life insurance and savings you already have. The calculator adds up your family's needs and subtracts existing coverage to estimate the coverage gap.
Round up rather than down. Funeral costs, inflation and one-time expenses often make the real need higher than the first estimate.
The DIME method
The calculator follows a common approach called DIME. It adds four needs your family would face without your income:
- Debt: credit cards, car loans and other balances, plus final expenses.
- Income: the years of income your family would need to replace.
- Mortgage: the balance needed to pay off the home.
- Education: the future cost of college for your children.
Term vs permanent life insurance
Term life insurance covers a set period, such as 20 or 30 years, and costs much less for the same death benefit. It fits most families who need to protect income while children are young and the mortgage is large.
Permanent life insurance, such as whole life or universal life, lasts your whole life and builds cash value, but it costs much more. It can make sense for estate planning or for lifelong needs, such as a dependent with special needs.
Frequently asked questions
How much life insurance do I need?
A common starting point is 10 to 12 times your income, but that rule ignores what the money is actually for. The calculator adds up the obligations instead: the income your household would have to replace and for how long, the mortgage balance, other debts, and college costs still to come. Then it subtracts the cover you already have, including any through work. What is left is the gap.
How much term life insurance do I need, and for how long?
Enough to cover the years your family would still depend on your income. A term that ends when the mortgage is paid off and the youngest child finishes college is the usual shape, because that is when the obligations the policy exists to cover come to an end. Buying a longer term than you need is the most common way people overpay.
Is there a simple rule of thumb?
A common rule is 10 to 12 times your annual income. It is a starting point only. A family with a large mortgage and young children may need more; a couple near retirement with no debt may need less.
Does a stay-at-home parent need life insurance?
Often yes. Replacing childcare, household work and transportation can cost a family tens of thousands of dollars a year.
Should I count the life insurance I have through work?
Yes, but carefully. Group coverage usually ends when you leave the job, and it is often only one or two times your salary.
Keep reading
- Is life insurance worth it?
- Cash value life insurance pros and cons
- IUL vs Roth IRA
- College savings calculator
- Learning Center: estate and inheritance
- All free calculators
This calculator gives estimates for education only. It is not personalized financial, tax or legal advice. Check your numbers with a qualified professional before you make a decision.