How Much Life Insurance Do You Actually Need?
Most people either have too little life insurance or the wrong kind. Here's how to calculate exactly how much your family needs.
General information, not professional advice — see terms of use.
The most common rule of thumb is 10–12 times your annual income. For precision, use the DIME method:
D – Debt: All debts (mortgage, car loans, student loans, credit cards)
I – Income: Annual income × years until youngest child is 18
M – Mortgage: Full remaining mortgage balance
E – Education: $120,000–$200,000 per child
Term vs. whole life: For most people, a 20–30 year term policy is right. A healthy 35-year-old can get $500,000 of 20-year term coverage for $25–$35/month. Whole life costs 5–15x more for the same death benefit and the investment component rarely outperforms simply investing the premium difference.
Follow-up questions
What is the difference between term and whole life insurance?
Term covers you for a specific period at low cost. Whole life covers your entire life and builds cash value, but costs 5–15x more. Most financial advisors recommend term for the majority of people.
At what age should you get life insurance?
The younger and healthier you are, the cheaper it is. Locking in a 20-year term policy in your late 20s or early 30s is ideal — rates increase significantly every year you age.
Does life insurance pay out for all causes of death?
Standard policies cover death from any cause with two exceptions: suicide within the first 2 years (contestability period) and fraudulent misrepresentation on the application. Most policies cover COVID-19, accidents, and drug overdose.
More insurance answers
This page is general information, not professional advice, and it may not reflect the latest rules where you live. For your own situation, talk to a qualified adviser. Spotted an error? Email per@upperia.se and we will fix it.