How much life insurance do I need? How to figure out the amount that protects your family

The basic math: what your family would need minus what it already has

The clearest way to figure it out is to add up the costs your family would have to cover if you were gone and subtract the resources that already exist. This is the method explained by Life Happens, a nonprofit educational organization from the insurance industry.

Add up these items:

• Debts: credit cards, car loan, personal or student loans.
• Mortgage or rent: the mortgage balance, or the years of rent your family would need to cover.
• Income: the money your family would need each year to live, multiplied by the years they would depend on you (for example, until your youngest child finishes school).
• Education: what you want to leave for your children’s schooling.
• Final expenses: the funeral and other end-of-life costs. A funeral with a viewing and burial has a median cost of $8,300 in the U.S., not counting the cemetery (NFDA, 2023).
• Then subtract: your savings, other investments or retirement accounts your family could use, and the life insurance you already have (including coverage through work).

The Life Happens needs calculator suggests your family would need between 60% and 80% of your after-tax salary for everyday expenses. It is a starting point; every family is different.

The DIME method: an easy way to remember it

A common way to remember it is the acronym DIME, which helps you not leave out any piece of the math: Debt, Income, Mortgage and Education.

It is not a formula with fixed numbers: it is a checklist of what to add up. It is worth adding final expenses to that list and, at the end, subtracting what you already have.

There is also a quick rule of thumb mentioned by Life Happens: between 10 and 15 times your gross annual income. It gives you a rough idea, but the detailed math reflects your real situation much better.

Illustrative example with simple numbers

This is an illustrative example, not a real case. Picture a family with two young children where one person brings in most of the income:

• Debts (car and credit cards): $15,000
• Mortgage balance: $250,000
• Income: $40,000 a year for 10 years = $400,000
• Education for both children: $50,000
• Final expenses: $10,000
• Total needs: $725,000
• Minus savings ($20,000) and coverage through work ($50,000): −$70,000
• Approximate amount to cover: $655,000

Illustrative and simplified example: it does not account for inflation or interest, and it is not a recommendation for your case. Your amount depends on your real numbers and on what the insurance company approves.

Why life insurance through work is rarely enough

Having life insurance through work is a plus, but not everyone has it: according to the Bureau of Labor Statistics (BLS), in March 2026, 59% of private industry workers had access to life insurance through their job.

And when they do, it is usually a small amount. The NAIC (the association of state insurance commissioners) explains that these policies typically cover the equivalent of your salary for a year or two, an amount that may not even cover a mortgage or student loans.

It is also usually tied to your job: the NAIC warns that you lose that coverage if your job situation changes. The NAIC model law provides that, when your employment ends, you can convert it to an individual policy without a health exam if you apply within 31 days, but the premium is based on your age at that time. The exact rules depend on the state and the policy.

The practical takeaway: count work coverage as an extra and have your own policy that does not depend on your job.

Hispanic families and the coverage gap

According to the 2025 Insurance Barometer Study by LIMRA and Life Happens, only 40% of Hispanics in the U.S. have life insurance, down from 51% in 2021. Half, about 20 million adults, say they don’t have enough coverage to protect their loved ones.

The same study found that more than a quarter are unsure what type of policy they need or how much coverage. That is why it is worth doing the math calmly, with someone who explains each step in your language.

What type of insurance, and how to cover the mortgage

Once you know the amount, the next step is choosing the type. Term life insurance covers a set period (for example, while you pay off the mortgage or raise your children) and permanent life insurance covers your whole life. They can also be combined.

If your biggest concern is that your family can stay in the house, there is mortgage protection, a life insurance policy designed to cover that balance.

Review your coverage when your life changes

The right amount today may not be right in a few years. The NAIC recommends reviewing your policy every few years to keep up with changes in your family, your income and your needs. These are good times to do it:

• You get married or move in with a partner.
• You have or adopt a child.
• You buy a home or refinance your mortgage.
• You change jobs or lose your coverage through work.
• Your income goes up or down significantly.
• You get divorced or the people who depend on you change (for example, you start helping your parents).

Frequently asked questions