Life insurance protects your family's financial future if something happens to you. This calculator helps determine how much coverage you actually need.
How This Calculator Works
> [!IMPORTANT] > Rule of Thumb: Many advisors suggest 10-12 times your annual income, but this calculator uses a more precise "needs analysis" approach based on your actual financial situation.
This calculator considers:
- Income Replacement - Years of income your family would need
- Outstanding Debts - Mortgage, loans, credit cards
- Future Expenses - College funds, funeral costs
- Existing Resources - Current savings, existing coverage
The DIME Method
A popular framework for calculating life insurance needs:
| D | I | M | E |
| Debt | Income | Mortgage | Education |
| All debts (except mortgage) | 10-12 years of income | Full mortgage payoff | College costs for children |
Step-by-Step Example
Scenario: 35-year-old with family, $75,000 income
| Need | Amount |
| Income Replacement (10 years) | $750,000 |
| Mortgage Balance | $200,000 |
| Other Debts | $25,000 |
| College Fund (2 kids) | $100,000 |
| Total Need | $1,075,000 |
| Less: Savings/401k | -$50,000 |
| Less: Existing Coverage | $0 |
| Coverage Needed | $1,025,000 |
Frequently Asked Questions
Term vs Whole Life - which should I choose?
Term life is cheaper and covers you for a specific period (20-30 years). Whole life is more expensive but lasts your entire life and builds cash value. Most people should start with term.
How long should my term be?
Cover until you're financially independent. If you're 35 with young kids, a 20-30 year term ensures coverage until they're grown and you've built wealth.
When should I buy life insurance?
As soon as someone depends on your income - marriage, having children, buying a home. The younger and healthier you are, the cheaper the premiums.
Do I need life insurance if I'm single?
Usually no, unless someone co-signed loans for you. Once you have dependents or you're married, it becomes essential.
Key Points to Remember
- Don't underinsure - the cost difference for more coverage is often small
- Buy when you're young and healthy - premiums are cheaper
- Review every few years as your situation changes
- Term insurance is the most cost-effective for most families