How to use the Life Insurance Calculator
- 1 Enter your debts other than the mortgage.
- 2 Enter the income to replace and for how many years.
- 3 Enter your mortgage, education and final expenses.
- 4 Enter your existing insurance and savings, then read the coverage gap.
Worked example
Debts of $20,000, $70,000 of income for 10 years, a $250,000 mortgage, $100,000 for education and $15,000 of final expenses. The total need is $1,085,000. After $100,000 of existing cover and $50,000 of savings, the family would need about $935,000 of new coverage.
Features
DIME method
Debts, income, mortgage and education in one total.
Existing cover
Subtracts workplace and private policies and savings.
Coverage gap
The amount of new coverage to consider.
When to use it
New parents
Protect your family's future.
Homebuyers
Make sure the mortgage would be paid off.
Stay-at-home parents
Value childcare and household work.
Policy review
Check whether old coverage is still enough.
Frequently asked questions
How much life insurance do I need?
A common rule is 10 to 12 times your income, but the DIME method adds up your actual debts, income needs, mortgage and education costs.
Term or whole life?
Term life covers a set period, such as 20 or 30 years, at a much lower cost. Whole life lasts for life and builds cash value but costs far more.
Does workplace life insurance count?
Yes, but it often equals one or two times salary and usually ends when you leave the job.
Do stay-at-home parents need insurance?
Yes. Replacing childcare and household work can cost tens of thousands of dollars a year.
How long should my term be?
Until your children are independent and the mortgage is paid off.
Is the payout taxed?
Life insurance death benefits are generally not subject to federal income tax.
How much does term life insurance cost?
A healthy 30-year-old can often buy a 20-year, $500,000 policy for around $20 to $30 a month, but prices vary with age and health.
Should both parents have coverage?
Yes, if the family would face costs without either parent.
What is a beneficiary?
The person or trust who receives the payout. Keep beneficiaries up to date after life changes.
Can I have more than one policy?
Yes. Some people ladder policies with different terms to match falling needs.
Does insurance replace savings?
No. Insurance protects against early death, while savings build wealth for goals and retirement.
When should I buy life insurance?
Earlier is cheaper. Premiums are set by age and health when you apply, so buying in your 20s or 30s locks in lower rates.
Does a mortgage need its own policy?
Not necessarily. A term policy large enough to pay off the mortgage is usually cheaper than mortgage protection insurance.
How do I choose a company?
Check the insurer's financial strength rating, compare quotes and confirm the policy is licensed in your state.
Results are estimates based on the official rates linked above. Confirm important figures with the issuing authority or a qualified adviser before you act on them.
Reviewed by ToolsUnlocked Team · Last updated