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. 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 personal 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. That's 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 is different. A stay-at-home parent, a business owner, or someone with specific estate planning goals may need a different approach entirely.