Having life insurance is an important piece of your financial plan. Everyone says that you need to buy it. But how much life insurance do you actually need? While the answer varies from person to person, there are commonly used methods that help you answer this question. Here’s how to figure out how much life insurance to buy, real-life examples at different stages of life, and when to re-evaluate your life insurance to make sure you still have enough.
There isn’t a single “right” answer to how much life insurance you should buy. The answer depends on a variety of factors, including how much you make, who depends on your salary, how much debt you have, and what charitable contributions you want to make. Other considerations come into play as well, such as a child with a disability or whether you own a business with someone.
In my experience, how much life insurance you should buy also depends on what life stage you’re in. A single person in their 20s has vastly different needs than someone in their 30s with young children or an empty-nester on the verge of retirement.
Even if you aren’t working outside the home, it is important to think about buying life insurance. While you don’t get a paycheck as a stay-at-home parent, the contributions you make to the family are just as valuable. If you die, who takes the kids to school, runs errands, and handles everything while the other parent is at work earning money? For this reason, I always recommend that both parents have life insurance that covers their contributions to the household, even if they don’t have a regular paycheck.
5 Methods to Determine How Much Life Insurance to Buy
Knowing how much life insurance to buy not only ensures that you’re adequately covered, but it also prevents you from buying too much coverage that you don’t need. Here are five ways to calculate how much insurance to buy, ranging from a simple rule of thumb to a more personalized approach that ensures you don’t forget anything.
10x Method
The 10x Method is the simplest way to calculate how much life insurance to buy. Simply multiply your income by 10 to determine your coverage amount. For example, if you earn $75,000 per year, then your death benefit should be at least $750,000.
Some financial advisors use different multipliers, such as 7x or 15x your income, but the most commonly used formula is 10x your income. If you can’t afford 10x, consider dropping down to a lesser multiplier, like 5x or 7x. Alternatively, you can shorten the coverage period, then replace the policy with better coverage as your income allows.
10x Method + College Costs
This approach expands upon the 10x Method by factoring in the rising costs of college tuition. With college tuition increasing at a faster rate than inflation, these costs can quickly overwhelm your death benefit if you don’t factor them in separately.
For my clients who want a simple way to calculate how much life insurance to buy, I generally recommend this hybrid formula. It uses a simple calculation based on their income, but modifies the death benefit to account for how many children they have and how old they are. In my experience, if your children are in high school, you can choose a lower amount than if they are babies or toddlers.
If you’re unsure of how much to set aside for college (or don’t want to dive too deep into the weeds), use a round number of $100,000 per child.
Human Life Value Method
One of the major problems with the 10x Method is that it doesn’t account for your age or how long you plan on working. Using the Human Life Value Method takes care of that problem. This approach factors in the value of your future earnings using simple formulas based on a range of ages.
- 30x your income for ages 18 to 40
- 20x your income for ages 41 to 50
- 15x your income for ages 51 to 60
- 10x your income for ages 61 to retirement
Once you’ve retired, you’ll calculate how much life insurance to buy based on your net worth instead of your income. Lower income retirees should focus on replacing Social Security income or caregiving expenses for their spouse, while higher net worth retirees should use life insurance as an estate planning tool to reduce or eliminate taxes.
The DIME Method
The DIME Method approach focuses on four main areas of your finances. It seeks to calculate a death benefit that pays off debt, replaces income, eliminates the mortgage, and covers future education expenses. In my experience, this is an excellent way to calculate how much life insurance to buy because it breaks down the equation into four main categories that people care about.
This approach allows people to look at each aspect of their finances individually before adding them together to determine an appropriate death benefit amount. However, two factors that aren’t included are the caregiving needs of the surviving spouse or any disabled children and if any money should be donated to charity. These are critical pieces of an estate plan that you don’t want to forget.
Financial Needs Minus Existing Funds Method
The most in-depth analysis can actually result in the most cost savings. This method not only calculates what your financial needs are, but it also factors in how much your assets are so you don’t overspend on life insurance.
Under this approach, you’ll do a comprehensive review of your finances and estate planning wishes, then determine how much you already have set aside to pay for them. This method is often best for higher net worth clients and those who are willing to put in the effort to calculate each piece of their financial plan.
In my experience, this method isn’t worth it for young families and people with average incomes who are just focused on getting their basic life insurance needs covered.
Real Life Examples of How Much Life Insurance to Buy
These four scenarios will help you understand how much life insurance to buy using the formulas discussed above.
Single Renter With No Dependents
When you’re single and don’t have anyone counting on your income, you may be tempted to delay buying life insurance entirely. However, even single people without dependents should consider buying life insurance. Not only is the money able to cover funeral costs and pay off debts, but getting a policy when you’re young allows you to buy insurance before any health problems arise that can prevent getting approved later on.
For someone in this scenario, I would recommend a policy that’s 10x your income. If you’re making $60,000, buy life insurance with a death benefit of at least $600,000.
Young Married Couple With Two Kids and a Mortgage
In this scenario, I would recommend the couple use the 10x + College Method. This allows the family to buy life insurance based on their income and expected college costs. Since they have a mortgage and possible student loans, they can also use the DIME Method adjust the final number accordingly.
Assume that both adults make $75,000 and the family has a $325,000 mortgage. I’d recommend a death benefit of $1 million without the mortgage and $1.3 million if they want to include it. In my experience, income for young adults can quickly increase as they move up the ladder, so buying a $1.5 million life insurance policy wouldn’t cost much extra and would allow them to keep the policy longer before needing to up the death benefit.
Established Earner at Age 50
During the middle of your career, you may be at the peak of your earnings. At this stage, if your family lost your income, it could derail plans to pay off the mortgage, cover college tuition, and set aside enough money for retirement. In my experience, this stage has people recognizing they need life insurance, but they’re often too busy to do a deep dive into their finances.
The DIME Method helps them break down their life insurance needs into smaller, bite-sized chunks. By breaking it down into smaller pieces, they can spend an hour here and there calculating their needs rather than being overwhelmed by the big picture.
This is also a stage in life where kids may be graduating from college or just starting their degree. This timing can eliminate the need to cover those expenses in their life insurance death benefit.
With a $150,000 income per spouse and a $500,000 mortgage, each will need a death benefit of at least $2,000,000. This assumes that other debts are paid off and the kids have already graduated college.
Empty Nest Couple Nearing Retirement
When you’re older, there’s less of a need to replace income since your kids are now grown and the mortgage is usually paid off. Life insurance can still add value for paying off funeral costs and replacing lost Social Security income. Many older surviving spouses struggle since Social Security payments stop when you die and expenses often exceed a single retiree benefit.
Retirees should consider a deep dive into their finances using the needs versus net worth calculation. This ensures that their individual circumstances are covered whether they’re barely making ends meet off Social Security checks or they have a high net worth and a paid off home.
When to Re-Evaluate Your Life Insurance
There’s a tendency to set it and forget it when it comes to life insurance. However, your life insurance needs will change throughout your life. Consider these milestones as opportunities to re-evaluate your policy to determine if you need to change your death benefit, type of policy, or adjust beneficiaries.
- Get married
- Have children
- Buy a home
- Start a business (especially if you have a partner)
- Major increase in income
- Pay off mortgage or other substantial debt
- Kids graduate college
- Retire
The Bottom Line
While we’ve covered five methods to calculate how much life insurance to buy, the ultimate decision is a personal one. It depends on your income, debt, and other financial wishes. Your budget for how much you can afford to pay also impacts the decision on how much to buy. If you’ve calculated your ideal death benefit amount, but cannot afford the premiums right now, consider buying a smaller amount or shortening the term. As your income grows, you can replace the policy with a larger one or buy an additional policy to supplement your death benefit.
The information provided on this website is for general informational and educational purposes only and should not be considered legal, financial, or insurance advice. While we strive to keep content accurate and up to date, insurance laws, policies, and regulations can vary by state and may change over time.
Nothing on this site constitutes professional advice or a recommendation of any specific insurance product, provider, or strategy. You should consult with a licensed insurance agent, financial advisor, or legal professional regarding your individual situation before making any decisions.
Sources
- Guardian, How much life insurance do I need? Here are some rules of thumb. Published April 14, 2026
- US Bank, How much life insurance do I need? Accessed July 17, 2026.
- NerdWallet, How Much Life Insurance Do I Need? Use This Calculator. Published March 20, 2026.
- Wall Street Journal, How Much Life Insurance Do I Need? Published April 28, 2026.
- TruStage, How much life insurance do you really need? Published May 29, 2024.
