One of the most common questions people ask when shopping for life insurance is: "How much do I actually need?" The answer depends on your income, debts, family size, and long-term goals — but there are some reliable frameworks to guide you.
The DIME Method
DIME stands for Debt, Income, Mortgage, and Education. Add up your total debts, multiply your annual income by the number of years your family would need support, add your remaining mortgage balance, and estimate future education costs for your children. The total is a solid starting point.
The 10x Rule
A simpler rule of thumb: multiply your annual income by 10. If you earn $60,000/year, aim for $600,000 in coverage. This ensures your family can invest the death benefit and live off the returns without depleting the principal.
Factors That Increase Your Need
- Young children or dependents with special needs
- High mortgage or consumer debt
- Stay-at-home spouse whose contributions would need to be replaced
- Business ownership or partnership obligations
- Desire to leave an inheritance
Factors That Decrease Your Need
- Significant savings or investments already in place
- No dependents
- Spouse with strong independent income
- Paid-off home
Every family is different. Lydia Garcia at OroTrust will walk you through a personalized needs analysis — completely free and with no obligation.