There is not one number that fits every household. A good policy is sized to your life, not pulled from a generic rule of thumb. The DIME method gets you close in about 10 minutes. You add debt, income to replace, remaining mortgage, and education. Then you subtract coverage you already have. Do not stop at group coverage from work. Employer policies are usually 1-2 times salary, and that coverage disappears if you leave. Use that first pass as an estimate, not a quote.
Request a Consultation or call (858) 465-4366.
Bring your DIME number. We'll map it to term vs permanent and carriers that fit your health.
What is a life insurance needs analysis?
A life insurance needs analysis is a written sizing of the death benefit to a real job: debts to clear, income to replace, mortgage years left, and education still ahead, minus coverage you already have. It is not a brochure multiple. It is a worksheet you can bring into a consult.
We use the DIME method on this page as that worksheet: Debt, Income, Mortgage, Education. Add those four, then subtract employer group coverage and policies you already own. Group coverage is usually one to two times salary and disappears if you leave. Treat that first pass as an estimate, not a quote.
A licensed advisor should stress-test the number when income, dependents, debt, or health change, or before you drop, convert, or replace a policy. Bring your DIME total and we will check it against carriers and underwriting. After the number is set, pick the chassis: term vs permanent life insurance.
Request a Consultation or call (858) 465-4366.
10 times income is a starting point, not a plan
The 10 times income life insurance rule is easy to remember. It is not a plan.
Ten times income can be a useful first sketch. For some households, a decade of paycheck replacement is in the right neighborhood. For others, it is not even close.
The rule only looks at earnings. It ignores the remaining mortgage, college, and non-mortgage debt. It also ignores coverage you already have, and savings you would actually use. Two families can earn the same salary and need very different death benefits. One has a paid-off house and grown kids. The other has a $420,000 loan and two children still in school.
Use 10 times income as a napkin number. Then run DIME. If the two results are far apart, trust the worksheet. The gap is usually the mortgage and education, not a rounding error.
This page is not tax or legal advice. A calculator is an estimate, not a quote. No one can promise a carrier will issue a given amount. Health, age, tobacco, and underwriting decide what is available and at what price.
The DIME method (one worksheet)
DIME stands for Debt, Income, Mortgage, and Education. Those four items are what a death benefit typically needs to cover so your family is not left carrying them.
- Debt: total your non-mortgage debts (cards, auto, personal loans) plus final expenses.
- Income: multiply your annual income by the number of years your family would need it replaced (often 10-15).
- Mortgage: your remaining home loan balance.
- Education: estimated future costs for your children.
Add those four lines. Then subtract savings you would actually spend, and coverage you already have. Do not subtract retirement accounts you would rather leave invested. The remainder is a strong starting estimate. That is what the DIME calculator on resources computes. It is an estimate, not a quote. For a look at premium, use quote. That page is a rate look, not a needs number.
Because we are independent, we compare many companies to find a fit for your health and budget.
Include the mortgage line. If the house still has a balance, your family still has that payment. Mortgage protection is life insurance sized to that loan so the balance can be cleared or the payment covered. It is not PMI. PMI protects the lender if you default. Mortgage protection is a death benefit for the people who live in the house.
Hypothetical household (illustrative only, not a real client)
One working spouse, one stay-at-home parent, two kids (ages 8 and 11). Annual income is $110,000. Years of income to replace: 12.
| Line | Math | Amount |
|---|---|---|
| Debt (auto + cards + final expenses) | $28,000 + $12,000 + $15,000 | $55,000 |
| Income (12 years) | $110,000 × 12 | $1,320,000 |
| Mortgage (remaining balance) | remaining loan | $420,000 |
| Education (two kids) | 2 × $80,000 | $160,000 |
| DIME gross | $55,000 + $1,320,000 + $420,000 + $160,000 | $1,955,000 |
| Minus usable savings | emergency fund, not retirement accounts | −$40,000 |
| Minus existing group coverage | 1× salary | −$110,000 |
| Net need | $1,955,000 − $40,000 − $110,000 | $1,805,000 |
Ten times income on the same household is $1,100,000. That shortcut misses most of the mortgage and education. It also skips the $55,000 of other debt. The family would look "insured" on paper and still have a large hole.
Your numbers will differ. The point is the arithmetic, not this example.
Do not rely only on group coverage
The mistake we see most is stopping at the policy from work. It is a benefit, not the whole plan.
Group coverage is usually 1-2 times salary. On $110,000 of income, that is often $110,000 to $220,000. In the worksheet above, the net need is $1,805,000. One times salary covers a slice of final expenses and a few months of bills. It does not replace 12 years of income, a $420,000 mortgage, or college.
That coverage also disappears if you leave. A new job, a layoff, or retirement can end the certificate. Some plans offer conversion or portability. Conversion is often expensive, limited in amount, and easy to miss on the way out. Do not count on taking the group rate with you.
If you are changing jobs, get your own policy in force before the group coverage ends. A personal term policy you own does not vanish when you switch employers.
Request a Consultation or call (858) 465-4366.
Coverage for a stay-at-home parent
Unpaid labor is still labor. If the parent who runs the household dies, the working spouse does not get those hours for free. Childcare, meals, transportation, homework, and the backup parent during illness all have a replacement cost. You would hire some of it. You would lose work time for the rest.
DIME still applies. The income line may be $0 on a W-2. The mortgage and education lines do not go away. Add a realistic cost to replace the unpaid work for the years the kids still need it. That is the cost of keeping the household standing.
A common miss is insuring only the paycheck. Then the stay-at-home parent has a small group certificate, or nothing. The working spouse is left to buy childcare at retail while still making the mortgage. Size both adults. The amounts will not be identical. Both jobs are real.
Term vs permanent for this job
For this job, term life insurance is the default. Term replaces income for a set period. You pick a length that matches the work (often 10, 20, or 30 years). You pay for the years the need exists.
Permanent coverage belongs here only if there is a second job to do after the income-replacement years. A lifelong dependent, estate liquidity, or a cash-value design is a different meeting. Size the death benefit first. Product second.
Infinite Banking is a separate later conversation, not the answer to how much coverage you need.
We will tell you when term is all you need.
Laddering two terms (mortgage vs kids through college)
You do not have to buy one 30-year policy for every dollar of need. Two clocks are often running at once. The mortgage has a remaining term. The kids have a remaining path through college. Those dates are rarely the same.
Laddering means two term policies, stacked. One layer tracks the remaining mortgage. When that loan is gone, that policy can expire and you stop paying for it. The second layer tracks the years until the children are through school. It stays in force after the house is paid, for as long as that education need lasts.
In the worksheet family, the $420,000 mortgage layer is one policy. The income-plus-education layer is another. You can keep the mortgage layer shorter and let the longer term carry income and college. Match duration to the job. Do not over-insure the later years with one giant contract.
Laddering is a choice, not a requirement. One policy and one bill is fine if you accept paying for years you may not need.
When to recalculate
Recalculate when your life changes, not on a random anniversary. Marriage, a house, a baby, a business, and an SBA loan life insurance condition each change the worksheet.
A marriage can add a person who depends on your income. It can also add a second income that changes the years you replace. A house adds the mortgage line, often the largest number after income. A baby adds years of income replacement and an education line. A business can add debt the household would still owe.
An SBA requirement is a lender condition, usually sized to a collateral shortfall, not to DIME. That bank number is not your family need. You may assign coverage the lender requires and still need a personal layer for income, college, and the house. Do not treat the closing condition as the whole plan.
Also recalculate if you leave a job and lose group coverage, or if a raise makes the old face amount look small.
FAQ
Is 10× enough?
Sometimes it is in the neighborhood. Often it is not. Ten times income ignores mortgage, education, and other debt. It also ignores coverage you already have. Run DIME. If 10× and DIME agree, you have a useful check. If they do not, the worksheet wins. There is no amount that is "enough" for everyone.
Is $500,000 enough life insurance?
It depends on the four DIME lines, not on a round number that sounds large. For a single person with no mortgage and little debt, $500,000 can be more than enough. For the illustrative household above, $500,000 does not cover the remaining mortgage, let alone 12 years of income. Ask what the money has to do. Then size it.
How much at 30 / 40 / 60?
Age is not the formula. Life stage is. At 30 you may have a new mortgage, young kids, and a long income-replacement window. At 40 those lines are often largest. At 60 the mortgage may be smaller and the kids may be done with school. The job may be final expenses, a last loan, or a spouse's remaining years. Run DIME at the age you are, with the life you have. Do not buy a number because a chart said "age 40."
Stay-at-home?
Yes. Insure the parent who does the unpaid work. Replace the cost of childcare and household labor for the years it would still be needed. Add the shared mortgage and education lines. A missing paycheck is not the only loss. A missing caregiver is a bill.
Replace group when leaving a job?
Plan on it. Group coverage usually ends when you leave. Conversion, if offered, is often a poor value. Own a personal term policy before your last day, sized to DIME, not to the old 1-2 times salary certificate.
Term or whole life?
For income replacement, term is the default. Whole life (or other permanent coverage) is only if there is a second job after those years. Do not use a permanent premium to solve a 20-year need you can cover with term. Size the death benefit first. Then decide product.
Does mortgage protection replace a needs analysis?
No. Mortgage protection covers the loan. DIME still includes debt, income, and education. A policy that pays off the house and leaves no income replacement is not a plan. Use the mortgage line inside DIME. Do not swap a full needs analysis for a loan-only product. Do not confuse either one with PMI.
Bring your number
You do not need a perfect spreadsheet. You need four lines, what you already own, and a conversation about term length. The DIME calculator on resources is the 10-minute pass. Quote is only a rate look.
Bring your DIME number. We'll map it to term vs permanent and carriers that fit your health.
We are independent. We shop many carriers for health and budget. We cannot guarantee underwriting or issue. We can size the need and tell you when term is all you need.
Request a Consultation or call (858) 465-4366.