How Much Life Insurance Do I Need? Retirement Planning Tips

Written by
Lindsey Crossmier
Lindsey Crossmier
Financial Writer
Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers Medicare, life insurance and dental insurance topics for RetireGuide. Research-based data drives her work.
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Edited By
Lamia Chowdhury
Lamia Chowdhury
Financial Editor
Lamia Chowdhury is a financial content editor for RetireGuide and has over three years of marketing experience in the finance industry. She has written copy for both digital and print pieces ranging from blogs, radio scripts and search ads to billboards, brochures, mailers and more.
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Reviewed By
Eric Estevez
Eric Estevez
Owner of HLC Insurance Broker, LLC
Eric Estevez is a duly licensed independent insurance broker and a former financial institution auditor with more than a decade of professional experience. He has specialized in federal, state and local compliance for both large and small businesses.
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Published: May 27, 2020
Updated: July 6, 2023
9 min read time
This page features 6 Cited Research Articles

Key Takeaways

There is no one-size-fits-all life insurance coverage amount. Simply put, the amount of life insurance coverage you need is based on what expenses you want covered and how long you want them covered for.
Use the 10 Times Rule and DIME Rule together to get a solid estimate of how much coverage you need.
Once you determine the coverage amount you need, it can help you determine which life insurance policy type works best for you.

How to Use the Life Insurance Calculator

Determine your financial and coverage needs in advance to get the closest estimate of coverage needed with our life insurance calculator.

Information to input in our calculator:

Current life insurance coverage (if you don’t have any coverage, enter zero in this field)
Number of years you’d require coverage
Current inflation rate
Return on investments
Income tax rate
Assets to cover expenses
Total expenses at death
Total value of current income
Future expenses

Estimating How Much Life Insurance You Need

There are two rules that many financial professionals recommend using when estimating how much life insurance you need: the 10 Times Rule and DIME Rule.

Note that these rules are guidelines, and everyone’s coverage should be personalized. Jiten Puri, CEO of PolicyAdvisor offered RetireGuide advice on what most people forget to consider in their life insurance coverage.

“Many people forget to factor in inflation and the general rise in costs over time when it comes to their insurance policy. The value of $500,000 today will not be the same 30 years from now, and that could mean your family will have less than you actually intended,” Puri told RetireGuide.

The 10 Times Rule

Purchasing coverage worth 10 times your annual salary can help your family pay debts, cover daily expenses, invest for the future and provide college tuition for your children.

The 10 Times Rule tends to be more of a guideline than an ironclad rule. Some financial experts recommend benefits worth five to seven times your yearly salary, while others like Puri, say you may need as much as 15 times your annual income.

“I recommend, as a base method, to get enough life insurance coverage for 10-15 times your annual salary. But one should also consider things like the age of one’s children, for example – as they could need more than that over a long term,” Puri told RetireGuide.

For instance, if your salary is $75,000, then the minimum life insurance coverage should be about $750,000. Remember this amount doesn’t include your debt, mortgage and potential education costs — that portion should be covered using the DIME Rule.

“I recommend, as a base method, to get enough life insurance coverage for 10-15 times your annual salary. But one should also consider things like the age of one's children, for example – as they could need more than that over a long term.”

— Jiten Puri, CEO of Policy Advisor

Once you multiply your salary by ten, you can plug in that number in the income section of the DIME rule for an even more accurate coverage estimation.

DIME Rule

The DIME rule offers a more personalized approach to determining your ideal coverage amount.

DIME stands for debt, income, mortgage and education. “The DIME rule is a great starting point for people to think about in terms of how much coverage they should have at certain ages,” Steve Rohrig, Chartered Life Underwriter®, Chartered Financial Consultant® and Retirement Income Certified Professional® told RetireGuide.

The DIME Rule

Debt	Includes any loans, business debts, credit card balances and an estimate of your funeral expenses.
Income	Calculate how long your dependents will need to rely on your salary and then multiply your income by that number. For example, if you have two children — ages 10 and 13 — you will need at least eight times your annual salary to cover expenses for your youngest child until they graduate high school.
Mortgage	Determine how much you still owe on your mortgage.
Education	Estimate the cost of sending your kids to college.

Combined, the 10 Times and DIME Rule should provide you with a rough estimate of how much life insurance you need.

However, consider confirming if you have enough coverage with a licensed financial advisor to avoid accidentally placing financial stress on your loved ones.

For a deeper analysis, learn more about the specific factors that influence your coverage needs and how they can dictate what type of life insurance policy you choose.

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Factors That Influence Your Life Insurance Needs

Generally, there are six main factors that affect the amount of life insurance coverage you need: if you have kids, personal debt, end-of-life expenses, loss of income, your general age and overall health.

A life insurance policy provides a death benefit to cover your debts, loss of income, end-of-living expenses and more, which would otherwise fall to the responsibility of your loved ones and face them with unnecessary financial hardship.

Key milestones may fluctuate your life insurance coverage needs, such as if you were to open your own business, or if your child graduated college. Learning how these factors affect your needs can make it easier to calculate the exact amount of life insurance coverage you need.

Life Insurance Calculator: Estimate Your Needed Coverage

Dependents

If you have children, you’ll need to consider the cost of raising each of them. According to a 2022 study by the Brookings Institution, it’s estimated that the total average cost to raise a child from birth to age 17 is $310,605.

Pro Tip

If you want to send your kids to college, that’s another factor to include in your life insurance coverage. In 2023, the average tuition cost is $35,553 per year.

Source: Education Data Initiative

Personal Debt and Liabilities

Any debts you leave behind after you die can reduce assets you had intended to leave to heirs. In addition, if your spouse or someone else co-signed a loan or held a joint account with you, that person will be responsible for paying off the obligation.

End-of-Life Expenses

The average funeral costs between $7,000 and $12,000, according to Lincoln Heritage Funeral Advantage. If you want to be cremated instead of buried, the average cost is between $6,000 and $7,000. Covering these expenses in your life insurance coverage will keep the responsibility from falling on your family.

Age and Health

Your health and age play a direct role in how much insurance you need, how long you need it and how much it may cost. For example, some people may need less coverage later in life because they have fewer dependents to support.

How Much Life Insurance People Need at Different Ages Infographic

Income

More life insurance coverage equals higher premiums; how much money you earn will directly impact the amount of life insurance you can afford. It’s important to consider how much room you have in your budget to pay monthly premiums.

Choosing the Right Life Insurance Policy

The average life insurance cost, caps in coverage and specific life considerations can help guide you to the right life insurance policy.

Factors To Consider When Choosing a Life Insurance Policy

If You Can Afford Premiums: The higher the coverage, the more costly the premium. Some policies offer cheaper premiums than others. It’s noteworthy to mention that whole life insurance policies are typically the most expensive. Make sure to compare quotes from multiple life insurance companies to get the best price.
How Long You Want Coverage For: Term policies offer temporary coverage, while permanent policies offer lifelong coverage. Decide how long you want coverage for before opting for the cheapest quote.
The Amount of Coverage You Want: Each life insurance policy has minimum and maximum coverage amounts. Term policies are known to have a coverage limit of up to 25 times your annual income. If you want a low death benefit just for end-of-life expenses, consider a burial insurance policy.
Specific Life Considerations: Some people have ulterior motives for their life insurance policy, like using the policy as an investment or for long-term care purposes. If you consider your life insurance policy as an investment, consider a permanent policy. If you want long-term care coverage, look into policies with long-term care riders available.

Term Life Insurance vs. Permanent Life Insurance

How much life insurance coverage you need will help you determine what type of life insurance policy you choose. The two main life insurance policy types are term and permanent.

When comparing the premium costs of term and permanent policies, a term policy is more affordable for coverage for a specific time period.

For example, if you need $1 million in life insurance coverage, but can’t afford costly permanent premiums, you can choose a term policy instead. That way, you have the right coverage amount, without the hefty price tag.

Keep in mind that term policies provide temporary coverage, typically between 10 to 30 years. If that doesn’t fit your coverage needs, reevaluate and then speak with an advisor.

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Frequently Asked Questions About How Much Life Insurance You Need

What happens if you don't have enough life insurance coverage?

If you don't have enough life insurance coverage, your family might struggle to pay for their housing, debts and daily expenses.

How can you adjust your life insurance coverage needs as you move into retirement and your financial situation changes?

As you near retirement, you can choose to convert a term life insurance policy into a permanent one. If you can now afford permanent premiums, you could potentially access the cash value component to cover health care costs. See if you can convert your policy without redoing the underwriting process to retain lower premiums.

Is $100,000 life insurance enough?

Whether or not $100,000 in life insurance coverage is enough depends on your purpose with the death benefit and if you’ve bulked up your savings. If the benefit is intended just for end-of-life expenses, then $100,000 would be more than enough for a death benefit. However, if you have minimal savings and you’re looking to cover your lost income for your family for years to come (or you want to send your kids off to college) you’ll find $100,000 won’t be enough life insurance coverage.

Editor Malori Malone contributed to this article.

Last Modified: July 6, 2023

Lindsey Crossmier Financial Writer

Lindsey Crossmier joined the RetireGuide team in 2022 as a writer to promote long-lasting financial literacy. She leverages her creative writing background, editorial experience and financial education from Yale to write retirement-focused financial content for those ready to prepare for their futures. Making complex information simple and accessible for all is her specialty.

Special focus on content about life insurance, Social Security, Medicare and certificates of deposits (CDs)
Research-based data drives her work
Bachelor’s degree in English from the University of Central Florida

Edited By

Lamia Chowdhury Financial Editor

Reviewed By

Eric Estevez Owner of HLC Insurance Broker, LLC

6 Cited Research Articles

Hanson, M. (2023, April 3). Average Cost of College & Tuition. Retrieved from https://educationdata.org/average-cost-of-college
Millar, A. (2023, March 31). What Is Whole of Life Insurance? Retrieved from https://www.usnews.com/uk/360-reviews/life-insurance/whole-life-insurance
Insurance Information Institute. (2023). How Much Life Insurance Do I Need? Retrieved from https://www.iii.org/article/how-much-life-insurance-do-i-need
Case, I. (2022, December 19). How Much Life Insurance Do I Need? Retrieved from https://www.miamiherald.com/money/how-much-life-insurance-do-you-need/
Lincoln Heritage Funeral Advantage. (2022, December 4). How Much Does a Funeral Cost? Retrieved from https://www.lhlic.com/consumer-resources/average-funeral-cost/
Sawhill, I. & et al. (2022, August 30). It’s Getting More Expensive To Raise Children. And Government Isn’t Doing Much To Help. Retrieved from https://www.brookings.edu/blog/up-front/2022/08/30/its-getting-more-expensive-to-raise-children-and-government-isnt-doing-much-to-help/