How Much Term Life Insurance Do I Need? (2026 Guide)

Your policy needs to replace your income for however long your dependents rely on it. Multiply your annual income by the number of years until your youngest child is financially independent, usually age 18, or 22 if you're planning to cover college. A parent earning $80,000 annually with a 5-year-old would need $1.36 million in income replacement alone (17 years multiplied by $80,000). Your spouse's income and earning potential affect this number too. Dual-income households with similar salaries need less coverage than single-income households.

Your policy should cover every debt your family would inherit if you died. That includes your mortgage balance, auto loans, student loans and credit card balances. For most families, the mortgage is the largest single item. If your remaining mortgage balance is $350,000, add that amount directly to your coverage calculation. Don't forget co-signed loans. If your name is on it, your death leaves that obligation to whoever co-signed with you.

College is the biggest line item most families forget to include. Four-year tuition at a public in-state university averages $47,800 total, while out-of-state universities average $127,000 or more. If you have two children, add $80,000 to $280,000 to your coverage target depending on the schools you're planning for. End-of-life costs run $15,000 to $25,000 for most families. If your spouse would need to replace your childcare contribution, factor in the annual cost of full-time care for however many years apply.

You don't need term life insurance to cover assets your family already has. Subtract your savings, retirement accounts, existing life insurance policies and any other liquid assets from your total obligation. A family with $200,000 in savings and a $250,000 employer policy needs $450,000 less in additional coverage. Be conservative about retirement accounts. Early withdrawal penalties and taxes cut into what you’d actually receive.

The simplest rule of thumb is to multiply your gross annual income by 10. If you’re earning $90,000 annually, target $900,000 in coverage. This method works well for quick estimates and gives you a floor to work with. Its weakness is that it ignores debt, number of dependents and specific financial obligations, so treat it as a starting point, not a final answer.

An upgrade to the 10x rule that accounts for education costs. Add $100,000 per child to the base calculation to cover college expenses. If you’re a parent earning $90,000 with two children, target $1.1 million ($900,000 plus $200,000). This method is straightforward and works well for families with school-age children, though it uses a rough college estimate that may not reflect current tuition costs at your target schools.

DIME is the most structured of the common methods and produces the most specific result. Add up four categories:

• Debt: All non-mortgage debt (auto loans, credit cards, student loans)
• Income: Annual income multiplied by years until your youngest child is independent
• Mortgage: Remaining mortgage balance
• Education: Estimated college costs for each child

A household with $50,000 in debt, $80,000 in annual income with 15 years of dependent coverage needed, a $300,000 mortgage balance and two children planning for public university would calculate: $50,000 + $1,200,000 + $300,000 + $80,000 = $1,630,000. DIME runs higher than the 10x rule, which is usually closer to reality.

Human Life Value (HLV) estimates what your future earnings are worth in today's dollars, treating your income as a financial asset your family would lose. The calculation multiplies your annual income by the number of working years remaining until retirement, adjusted for expected income growth and inflation. A 35-year-old earning $75,000 with 30 years until retirement has a human life value in the range of $2 million to $2.5 million. HLV produces the highest coverage targets of any method and works best for high earners with long working years ahead. Think of it as a ceiling rather than a shopping target.