In short
Add your debts, 10 years of the income your family would lose, the mortgage balance and each child's education, plus about $15,000 for final expenses. Subtract the coverage and savings you already have. For a family with an $85,000 income, a $250,000 mortgage and two children, that lands at about $1.2 million. The "10 times income" rule usually comes in low for young parents and high for empty nesters.
Key takeaways
- The DIME method (debt, income, mortgage, education) plus final expenses, minus what you already have, gives a number you can defend.
- "10 times income" under-insures young parents, who carry a mortgage and college costs on top of lost income, and over-insures empty nesters.
- Coverage through work is usually 1 to 2 times salary and ends when the job does. Count it, but do not lean on it.
- Coverage is cheap per dollar. The costly mistake is buying too little, not too much.
- The Nectar application runs this calculation for you and shows what each dollar of coverage does before you choose an amount.
"How much life insurance do I need?" has a real answer, and it is not a round number someone picked for you. It is what your family would have to pay off and replace if your income stopped, minus what they already have. You can work it out in five minutes with a pen, and this guide walks through every line.
The method below is the one our agents use and the one built into the Nectar application. It works for a single renter, a couple with a mortgage and a family with children, and it is honest enough to tell you when the answer is "not much yet."
What is the DIME method for life insurance?
DIME stands for debt, income, mortgage and education. Each letter is a category of money your family would need if you died this year. Add them up:
- Debt. Everything that would still be owed: car loans, credit cards, private student loans, personal loans. Federal student loans are usually discharged at death, so leave them out. A private loan with a co-signer stays in.
- Income. The yearly income your household would lose, multiplied by the years they would need it. Ten years is the usual starting point. Parents of young children often use more; couples without children often use less.
- Mortgage. The remaining balance, so the house can be paid off or the payments covered without your income. If you rent, this line is zero.
- Education. What you want set aside per child. A figure like $80,000 each covers a large share of an in-state public degree; use more for private school.
Then add final expenses: funeral or cremation, last medical bills, probate costs. Around $15,000 is a reasonable planning figure.
Then subtract what your family already has: life insurance through work, any individual policy you own, and savings they would actually spend. Most families leave retirement accounts out of the subtraction, because the survivor still has to retire on them.
What is left is the coverage to buy.
A worked example: $85,000 income, a mortgage and two children
Take a 35-year-old earning $85,000, with a partner, two children in elementary school, $250,000 left on the mortgage and $100,000 of group life insurance through work. The plan looks like this:
- Debt: a car loan and a credit card balance, $20,000
- Income: $85,000 a year for 10 years, $850,000
- Mortgage: $250,000 remaining
- Education: two children at $80,000 each, $160,000
- Final expenses: $15,000
- Total need: $1,295,000
- Minus the $100,000 of group coverage at work. The family's savings are their emergency fund, so nothing else comes off.
- Coverage to buy: $1,195,000, which rounds to about $1.2 million
That number surprises people. What $1.2 million costs is less alarming. At 35, $500,000 of 20-year coverage is about $34 a month for a man and $28 for a woman in our preferred non-tobacco class, and the price per dollar falls as the amount rises, so $1 million often costs less than twice the $500,000 price. Our pricing by age has the full table and the term life insurance cost guide explains what moves it. Every figure is an estimate until underwriting sets your rate class.
Coverage is cheap per dollar; the expensive mistake is buying too little. If the plan says $1.2 million, price $1.2 million before you talk yourself down to a round number that only covers the house.
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Is 10 times your income enough life insurance?
The "10 times income" rule is easy to remember. For the family above it gives $850,000, about $350,000 less than the plan, because the mortgage and college costs sit on top of the lost income rather than inside it. The younger your children, the more years of income and the more education cost you are carrying, so the rule under-insures exactly the people who need coverage most. A 30-year-old with a newborn and a new 30-year mortgage can easily need 15 times income.
At the other end, a 55-year-old earning $120,000 with a paid-off house, grown children and a partner with a pension does not need $1.2 million. The survivor's real gap might be three years of income plus final expenses, about $375,000. The rule over-insures empty nesters, and at 55, when $500,000 of 20-year coverage is about $198 a month for a man, paying for coverage nobody would use is an expensive habit.
Rules of thumb from NerdWallet and similar sites are useful as a sanity check: if your DIME number is wildly different from 10 times income, make sure you have not dropped a line. Use the plan as the answer and the rule as the check.
Does life insurance through work count?
Yes, with two cautions. Group life is usually 1 to 2 times salary, sometimes a flat amount, and the employer pays most or all of it. Put it on the "minus" line.
But it is not yours. It usually ends when you leave the job, and most plans either cannot be taken with you or can only be continued at a much higher price. Some plans also reduce the benefit once you pass a certain age. And the amount is set by your salary, not by your family's needs: a person earning $85,000 with $100,000 of group coverage has a little over one year of income replaced, not ten.
Treat work coverage as a bonus that fills the top of the plan. Buy the rest in a policy you own, priced at today's age, that follows you from job to job. If you are between jobs or about to change jobs, run the numbers as if the group coverage were zero.
How much life insurance do different households need?
The same method gives very different answers for different households. Three typical profiles:
| Household | What the plan adds up to | Minus what they have | Lands at |
|---|---|---|---|
| Single renter, 29, $60,000 income, no dependents | $20,000 co-signed loans + $15,000 final expenses = $35,000 | $50,000 group coverage at work | $0 to $100,000 |
| Couple with a mortgage, both 34, $70,000 each, no children | 5 years of one income ($350,000) + $280,000 mortgage + $15,000 final expenses = $645,000 | $70,000 group coverage + $25,000 savings | About $550,000 each |
| Parents of two, 35, $85,000 income (the example above) | $850,000 income + $250,000 mortgage + $20,000 debt + $160,000 education + $15,000 final expenses = $1,295,000 | $100,000 group coverage | About $1.2 million |
A few notes on reading the table:
- The single renter's honest answer is often "not yet." Nobody depends on the income, and work coverage already covers the co-signed loan. A small policy bought now locks in a price set at 29, which is worth something if children or a mortgage are a few years away, but it is optional.
- The couple replaces five years rather than ten because the survivor keeps earning; the mortgage is the real exposure. Each partner needs a policy of their own, since the plan is per person, not per household. Life insurance to cover a mortgage goes deeper on matching the term to the loan.
- The parents of two land where the worked example landed. If one parent is at home, that parent needs coverage as well, because replacing childcare and household work costs real money for as long as the children are young. Life insurance for stay-at-home parents shows how to size it, and life insurance for new parents covers the first-baby version of the plan.
How to turn the number into a policy
Three decisions remain once you have the number.
Amount. Round up to a clean figure rather than down. Because the rate per thousand dollars falls as coverage rises, rounding up costs less than it looks.
Term length. Match it to the last year someone depends on your income: the year the youngest child finishes college or the mortgage is paid off, whichever comes later. For the family in the example that is 20 years, or 30 if they want the whole mortgage covered to the end. A 30-year term costs about 45 percent more than a 20-year term.
Timing. Now. Your age at purchase sets the price for the whole term, and a health change between now and later can take the preferred class off the table.
The Nectar application builds this plan for you: enter your income, debts, mortgage and children, and it shows what each dollar of coverage does, which line it pays off and for how many years, before you pick an amount. If you only want the number, the coverage calculator on our homepage does the DIME arithmetic in under a minute. Either way, the price you see is an estimate, and the final price is set during underwriting.
Revisit the plan after a birth, a move, a raise or a payoff. The number drops as the mortgage shrinks and the children grow up, which is why term insurance, which simply ends, fits most families.
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Frequently asked questions
Is $500,000 enough life insurance?
For a single person, or a couple without a mortgage, usually yes. For a parent with a mortgage and children, usually no. The worked example above, with an $85,000 income, a $250,000 mortgage and two children, lands at about $1.2 million. Run the DIME numbers rather than guessing.
How much life insurance do I need for a $300,000 mortgage?
At least $300,000, so the house can be paid off, plus the income and education costs your family would lose. The mortgage is rarely the whole answer; for most families it is the second-largest line after income.
Do I need life insurance if I have no kids?
If nobody depends on your income and nobody co-signed your debts, you can wait. If a partner relies on your income for the mortgage or rent, cover that gap: often the mortgage balance plus a few years of income.
Does a stay-at-home parent need life insurance?
Yes. Replacing childcare and household work costs real money for as long as the children are young. Price the childcare the working parent would have to buy, plus any share of the mortgage that would become harder to pay, and insure that.
How much life insurance do I need at 40?
Age does not change the formula, only the price. A 40-year-old with the same income, mortgage and children as the example needs the same $1.2 million. The policy costs more because $500,000 of 20-year coverage is about $47 a month for a man at 40 versus $34 at 35.
Nectar Term policies are issued by Nectar's partner insurers, each rated A or better by A.M. Best, and serviced by Nectar. Prices in this article are estimates calibrated to published 2026 averages and are not an offer of coverage. Final rates are set during underwriting.
Keep reading
Life StagesLife Insurance to Protect a Spouse's Retirement: The Math
Life insurance to protect a spouse's retirement: size a 10- or 15-year term to the lost Social Security check and the mortgage. About $78 a month at 55.
UnderwritingLife Insurance for Dangerous Jobs: How Underwriting Works
Life insurance for dangerous jobs: most roofers, loggers, pilots and officers are issued with no occupational rating; a few jobs carry a flat extra.
BasicsFinal Expense Insurance vs Term Life: Which Should You Buy?
Final expense insurance vs term life: if you are 60 or under and qualify, $100,000 of 10-year term costs about $36 a month at 55, far less per dollar.