10xCommon income-multiple rule of thumb
38%Americans with a life insurance gap
~$10,000Average funeral cost estimate
+85%Price increase for doubling cover from $500K to $1M
Key takeaway: A quick estimate is ten times your annual income. A better one adds the income your family would need for a set number of years, your mortgage and debts, future education costs and final expenses, then subtracts savings and existing cover. Because doubling cover doesn’t double the price, it’s usually better to err on the high side.
How we put this guide together: Calculation methods follow John Hancock’s September 2026 guide and common planning practice; coverage-gap figures come from the LIMRA and Life Happens 2026 Insurance Barometer; prices from MoneyGeek’s September 2026 data. This is general guidance, not financial advice. Figures were checked in October 2026; your own price depends on your age, health and the insurer. See our advertiser disclosure.

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Method 1: The income multiple

Multiply your annual income by ten. Someone earning $50,000 would start at $500,000. It’s quick, but it ignores how many children you have, your debts and what you’ve already saved.

Method 2: DIME

DIME adds four items:

  • D – Debt: credit cards, car loans, student loans and other debts (not the mortgage).
  • I – Income: your annual income multiplied by the number of years your family would need it.
  • M – Mortgage: the remaining balance.
  • E – Education: expected college or school costs for your children.

Method 3: A full needs calculation

This is the most accurate approach. Add up what your family would need, then subtract what they’d already have.

Example: 38-year-old parent, two children aged 4 and 7Amount
Income replacement: $60,000 a year for 15 years$900,000
Mortgage balance$240,000
Car loan and credit cards$20,000
Education fund for two children$100,000
Funeral and final expenses$10,000
Total needs$1,270,000
Minus savings and investments−$60,000
Minus workplace life insurance−$60,000
Cover neededabout $1,150,000

Illustrative example only. John Hancock puts average funeral costs at about $10,000.

This family might choose a $1 million to $1.25 million, 20-year term policy, long enough to see the youngest child through college. Planners sometimes reduce the income figure by what a surviving spouse earns, or by expected Social Security survivor benefits.

Adjust for your situation

  • Stay-at-home parents need cover too: replacing childcare, transport and household work is expensive.
  • Single people with no dependents may only need enough for final expenses and any co-signed debts.
  • People caring for aging parents should add the cost of care they currently provide or fund.
  • Business owners may need extra cover for business debts or a buy-sell agreement.
  • Those leaving a legacy or charitable gift can add that amount.

Why most people are under-insured

The 2026 Insurance Barometer found 18% of people who own life insurance say they don’t have enough, and the overall need gap is 38%, about 92 million adults. Many rely only on workplace cover, which is often just one or two times salary and usually ends when you leave the job; see our group life insurance guide.

What extra cover costs

Larger policies are better value. In MoneyGeek’s September 2026 data, a 40-year-old man paid about $35 a month for $250,000, $59 for $500,000 and $109 for $1 million of 20-year term cover. Going from $500,000 to $1 million adds about $50 a month. See our 2026 cost guide.

Choosing the term length

Match the term to your longest major obligation: the years until your youngest child is independent, your mortgage is paid off or you retire. Some families combine policies of different lengths (a “ladder”), so cover falls as debts shrink. Compare options in our guide to term vs. whole life insurance, then get quotes from the insurers we compare.

Frequently asked questions

Is 10 times my salary enough life insurance?

It’s a reasonable starting point, but a needs calculation is better. Families with young children, large mortgages or little savings often need more.

Should I include my mortgage in life insurance?

Yes, if you want your family to be able to pay it off or keep making payments. The DIME method adds the full balance.

How much life insurance does a stay-at-home parent need?

Enough to pay for childcare, household help and lost support until the children are independent; often several hundred thousand dollars.

Does my workplace life insurance count?

You can subtract it, but remember it usually ends when you leave the job, so many people don’t rely on it.

Can I have more than one life insurance policy?

Yes. Many people combine workplace cover with an individual policy, or ladder two term policies of different lengths.

Sources

Insurance prices, discounts and rules change often and vary by state. Figures were checked in October 2026; confirm details with the insurer or your state insurance department.