How Much Term Life Insurance You Need: The DIME Math
Rules of thumb like "ten times your salary" hide the real calculation. A 35-year-old with a $240,000 mortgage and two kids lands near $1 million of coverage. Here is the worksheet.
Life insurance advice usually comes in one of two flavors: a vague multiplier ("get 10× your salary!") or a sales pitch. Both skip the actual question — how much money your family would need, and for how long. The DIME method answers it in four lines, and on a realistic mid-career household it lands somewhere near $1 million, which sounds enormous until you price what it costs. Let's run the whole worksheet.
The household
A 35-year-old, married, two kids aged 7 and 4. Salary $68,000. Mortgage balance $240,000. Car loan $14,000, credit cards $8,000. The hope, like most families', is in-state public college. Adjust every line to your own numbers; the structure is what matters.
D — Debt, excluding the mortgage
Non-mortgage debt here totals $22,000 ($14,000 car + $8,000 cards). The policy should retire it outright so the survivor never faces a repossession or collection decision while grieving. Add funeral costs, which typically run $7,000–$15,000, and this line is conservatively $30,000–$35,000. We'll carry $22,000 plus the funeral from the buffer noted at the end.
I — Income replacement
The stated assumption: replace 10 years of gross income — $68,000 × 10 = $680,000 — so the surviving spouse can cut hours or take a lower-paying job while the kids are young. Ten years takes the youngest to 14 and the oldest past 17. Replacing income all the way to retirement would demand $1.3–1.5 million more and is rarely purchased; the honest middle ground is a bridge for the dependent years, with retirement savings continuing from the survivor's own earnings.
Sanity-check that slice: $680,000 spread over exactly 10 years is $68,000/year drawn down to zero — this money is designed to be spent, not invested forever. If you'd rather see the invested version: parked at a conservative 4%, the principal supports roughly $84,000/year for a decade including interest, or $40,000/year indefinitely on a full $1 million. Either way the number buys real years, not a token cushion.
M — Mortgage
$240,000, the remaining balance. Paying the house off removes the single largest fixed cost and gives the survivor options — stay, downsize on their own timeline, or keep the mortgage and redirect the proceeds. Covering the full balance (rather than a vague "contribution") is what makes those options real.
E — Education
$50,000 per child toward in-state public tuition and housing: $100,000 total. That will not cover a private university, but it fully funds the base-case assumption stated up front. If private school is genuinely the plan, this line doubles or worse — better to know that now than for the survivors to borrow it later.
The total
The household everyone forgets: the stay-at-home parent
DIME assumes an income to replace, so families with a non-earning parent often skip coverage for that parent entirely. That is the most expensive omission in the method. If the stay-at-home parent died, the surviving parent would need to buy replacement childcare and household labor — work that has a market price. A concrete assumption: 40 hours a week of childcare at $15/hour is $31,200/year, and it runs until the youngest child is school-age and then partially for years more. Price that stream for 8–10 years and a $250,000–$300,000 policy on the non-earning parent is a defensible number — and because non-earning applicants are priced younger-and-healthier, the premium is small. Skip this and the survivor faces the loss while simultaneously scrambling to keep a job and fund full-time childcare.
Who genuinely does not need it
Single people with no dependents, no co-signed debts, and liquid savings for a funeral generally do not need life insurance. Nobody depends on the income, so there is nothing to replace. The exceptions: anyone who co-signed a loan (a parent on a student loan or car note inherits the balance), and anyone whose future plans include dependents — buying young locks in insurability, which matters more than the premium, because health conditions acquired later can make coverage expensive or unavailable.
After the policy: convertibility and re-shopping
Two features worth knowing at signing. Most level-term policies include a conversion right: you can convert to the insurer's permanent product during a defined window without a new medical exam. It is valuable insurance-against-uninsurability — if you develop a serious condition in year six and still need coverage, that window is the exit. Second, when the term ends and the need has not, you can re-shop a new term policy — priced at your then-current age and health. This is exactly why the ladder fits: as the mortgage shrinks and the kids launch, the required face amount drops, and a smaller new policy keeps the premium flat over a lifetime instead of letting one policy's cost jump off the level-premium cliff.
What a million dollars of term costs
Indicative quotes for a healthy nonsmoker at 35: a $500,000, 20-year level term runs roughly $28/month; $1,000,000 roughly $52/month. These are typical quote-range figures to set expectations — real prices depend on health, tobacco use, state, and insurer, and the only way to know yours is to apply. But the shape of the answer is the point: the largest purchase in this article costs less per month than most phone plans.
Now compare it with what most people actually have: employer group life, typically 1× salary. Here that is $68,000 — 6.8% of the calculated need — and it vanishes the day the job does. Group coverage is a perk, not a plan.
Laddering: matching the term to the need
The need is not flat. The mortgage amortizes, the kids age out of the income-replacement window, and the obligation shrinks year by year. A ladder mirrors that: $500,000 of 10-year term plus $500,000 of 20-year term prices at roughly $46/month combined (indicative, same health profile) versus $52 for a single $1M/20-year policy — about $1,440 saved across the term. The savings are modest; the better reason to ladder is fit. When the kids are grown, you want the expensive early-years protection expiring, not a 20-year premium still billing for it.
Term, not permanent — usually
For pure income replacement, level term does the entire job. Permanent policies bundle insurance with an investment component at a multiple of the premium for the same death benefit; they have legitimate niche uses (estate planning, lifelong dependents), but as a default household purchase they are usually the most expensive way to buy the wrong amount of coverage. If someone recommends permanent insurance, evaluate the insurance need with DIME and the investment separately, then price both.
Getting it issued
Expect health questions and, commonly, a brief paramedical exam; answer honestly, because misrepresentation can void the policy exactly when it matters. Choose a level premium for the full term — teaser-priced term that re-rates every five years is the trap. Name actual people as beneficiaries, never "the estate," and revisit the amounts after any mortgage move or new child. And note what raises the price: every birthday. A quote at 36 is higher than at 35, and the gap compounds, so the cheapest year to buy is always the one you are in — as soon as anyone depends on your income.
The DIME number is the anchor; the rest of the safety net supports it. Pair the policy with an emergency fund sized to real months of expenses, and use the same expectation-vs-cost logic from the deductible math when choosing riders or re-shopping the policy later. The full monthly-budget context is in the blog archive, and the calculators page can sanity-check the income-replacement slice against your own salary.
