Where do these numbers come from?
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Three methods
- Income multiple: 10× income. Quick, ignores your situation.
- DIME: Debt + Income (years × salary) + Mortgage + Education.
- Needs method: DIME plus final expenses, minus savings and existing coverage (what the calculator above does).
Needs-method examples
| Income | Years | Mortgage | Education | Savings + coverage | Estimate |
|---|---|---|---|---|---|
| $50,000 | 10 | $150,000 | $50,000 | $50,000 | $665,000 |
| $80,000 | 10 | $250,000 | $100,000 | $150,000 | $1,015,000 |
| $120,000 | 15 | $400,000 | $200,000 | $300,000 | $2,115,000 |
| $80,000 | 5 | $0 | $0 | $50,000 | $365,000 |
Examples include $15,000 of final expenses. They are illustrations, not recommendations.
Sources and assumptions
Related
Frequently asked questions
Is $500,000 of life insurance enough?
It depends on income, debts and dependents. For someone earning $50,000 with no mortgage it may be; with young kids and a large mortgage it may fall short.
How long should term life insurance last?
Usually until your youngest child is independent or your mortgage is paid off.