How Much Life Insurance Do I Actually Need?

By McAdams Insurance Agency · August 2026 · 3 min read

“How much life insurance do I need?” is one of the most common questions we get — and there's no single right number, but there are a couple of simple starting points.

A simple starting formula

A commonly used rule of thumb is 10–12 times your annual income. It's a rough starting point, not a precise answer, but it gives most families a reasonable ballpark to start the conversation.

The DIME method (more detailed)

For a more tailored number, add up these four categories:

• Debt — total non-mortgage debt you'd want paid off
• Income — years of income your family would need replaced, multiplied by your annual income
• Mortgage — your remaining mortgage balance
• Education — estimated future education costs for your children

Adding those four numbers together typically gives a more personalized coverage target than a flat multiple of income alone.

Term length matters too

Beyond the amount, think about how long you need coverage — often tied to how many years until your kids are financially independent or your mortgage is paid off. A 20-year term policy timed to end around then is a common approach.

It's a starting point, not a rule

Every family's situation is different — a stay-at-home parent, a business owner, or someone with unique estate planning goals may need a different approach entirely.