A practical, method-based walkthrough — not a one-size-fits-all rule.
The honest answer is: it depends on what your household would need to replace if your income stopped tomorrow. Generic rules of thumb like "buy 10 times your income" are easy to remember, but they don't account for your mortgage, your debts, your savings, or how many years of support your family would actually need. This guide walks through two widely used, non-proprietary methods — a quick income-replacement approach and the more detailed DIME framework — so you can land on a number that reflects your actual household, then check it with our calculator.
The income-replacement method asks a simple question: how many years of your income would your family need to maintain their standard of living? You multiply your annual income by that number of years. If you earn $70,000 a year and want to replace 12 years of income, that's $840,000 in coverage.
The hard part isn't the math — it's picking the number of years. Most people choose somewhere between the number of years until their youngest child becomes financially independent and roughly 15 years, since that covers a meaningful runway without assuming your family never adjusts spending. A single 28-year-old with no dependents might reasonably choose a much shorter window, or decide they need very little coverage at all.
DIME stands for Debt, Income, Mortgage, Education — four categories that, added together, tend to capture what a policy is actually meant to cover. It's more granular than a flat income multiple because it separates "replace my income" from "pay off specific things I owe" and "fund specific goals I have."
Add those four together, then most versions of DIME also subtract what you already have: existing life insurance coverage and liquid savings or investments earmarked for these goals. Many people also add a final-expenses line (commonly estimated around $15,000 for funeral and end-of-life costs) since that's an immediate cash need that shouldn't come out of emergency savings.
Take a household with $70,000 in annual income, a $200,000 mortgage, $10,000 in other debt, a $50,000 education goal, $15,000 in final expenses, $25,000 in savings earmarked for this purpose, and no existing coverage. Using a 12-year income-replacement window:
| Income replacement ($70,000 × 12) | $840,000 |
| Mortgage balance | $200,000 |
| Other debt | $10,000 |
| Education fund | $50,000 |
| Final expenses | $15,000 |
| Less: savings | −$25,000 |
| Less: existing coverage | −$0 |
| Estimated need | $1,090,000 |
Compare that to a flat "10x income" rule, which would suggest $700,000 — roughly 36% lower than the DIME-based estimate for this household, mostly because the mortgage and education goal aren't captured by an income multiple alone.
Include: your gross annual income, your actual outstanding debts, your real mortgage balance, and a realistic (not aspirational) education or childcare goal. Also account for a non-working spouse's contribution — childcare, household management, and other unpaid labor have real replacement costs even without a paycheck; see our guide for young families for how to think about that.
Don't rely on: employer group life insurance as your whole plan. Group coverage is usually a modest flat amount (often 1–2x salary) or ends when you leave the job, so most households still need an individual policy layered on top. Also be careful about double-counting retirement accounts you'll need for retirement itself — only count assets you'd genuinely be willing to liquidate for this purpose.
No formula knows your health, your state's cost of living, your family's actual spending habits, or how your circumstances might change. Treat any calculator output — ours included — as a well-reasoned starting number for a conversation with a licensed insurance professional, not a final answer. Revisit the number whenever something significant changes: a new child, a new mortgage, a big income change, or a major debt paid off.