Insurance Suite

Life Insurance Coverage Needs Calculator

How much coverage does your family actually need?

Direct answer

Coverage needs are built by funding a list, not by picking a round number: income replacement for the years dependants still need it, the mortgage and other debts, education, childcare, final expenses, then minus existing cover, savings and survivor benefits. The DIME method is the short version; this tool runs the full list.

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Legal Disclaimer

ClaimLedge provides educational estimates for general informational purposes only. This is a needs-planning model, not a quote, a policy recommendation, or financial advice, and it does not create any advisory relationship. Coverage needs depend on tax position, surviving-spouse income, investment rates, and estate structure this model does not see. Consult a licensed insurance professional or fee-only financial planner before purchasing or modifying any policy.

Estimate Your Life Insurance Coverage Needs

Free · Anonymous
Income & obligations
Gross, before tax. The income your household dos not stop needing.
Until dependents are self-sufficient or the surviving partner reaches a stable income of their own.
Car loans, student loans, credit cards, personal loans — anything the estate would owe.
Payoff amount, not home value. Zero if you rent.
Family & final costs
K-12 childcare + college. Rule of thumb: $100k–$130k per child through a four-year public degree.
Funeral, estate settlement, immediate liquidity. $15,000 is a representative planning default.
What you already have
Include employer group life, but remember it ends when the job does.
Cash and investments the family could access. Exclude retirement accounts your spouse should not have to raid.

Calculated in your browser · Nothing submitted to ClaimLedge · Compare saves only when you choose it

Estimated Coverage Gap Awaiting input
—

The gap is what a new policy is for. DIME total need minus coverage and assets your family already has — if the result is positive, that number is the size of the term policy to shop. If it is zero or negative, you are likely carrying more coverage than the objective math requires.

Gross need: — · Already covered: —

$0gap filled →
Debt (non-mortgage)—
Income replacement (12 yr × —/mo)—
Mortgage payoff—
Education & childcare—
Final expenses—
(F) Gross coverage need—
(G) Less: existing coverage—
Estimated coverage gap—

How to read the gap: —
This is a planning target, not a product. Income-replacement math does not price investment returns on the death benefit, inflation, or a surviving partner's own earnings — the planner-grade refinements. Use the number to size a level-term policy, not to justify permanent insurance you do not need. Educational estimate only.

Next step

Before life cover, the years you cannot work

A long disability is more likely than an early death. Check whether the income would keep coming if you could not work.

Check disability cover

How the DIME formula works

DIME is the standard needs-analysis framework because it forces specificity: instead of a vague "seven to ten times salary," it totals the four obligations a death actually creates for a family.

Need   = Debt + (Income × Years) + Mortgage + Education + Final Expenses
Gap     = Need − Existing Coverage − Liquid Assets
Policy  = Gap (rounded up to the nearest $50,000) (underinsurance beats overinsurance)

The formula's virtue is that it prices actual liabilities rather than an arbitrary income multiple. Its known limitation is that it prices income replacement linearly — ignoring the investment returns a large tax-free death benefit can earn — which is why professional needs analyses layer a present-value discount on top. DIME answers "how much" conservatively-high, which for a family-protection decision is the correct side to be wrong on.

Why "ten times your salary" undershoots most families

The 7–10× income shortcut predates dual-mortgage, childcare-priced household economics. Run the breakdown on a typical profile — $90,000 income, 12 years of replacement, a $320,000 mortgage, two children headed to college — and the gross need approaches $1.7 million before final expenses, against a typical existing group policy of one to two times salary. The gap in that illustrative case is roughly $1.2–$1.4 million of unowned coverage. That is not an argument for buying more permanent insurance; it is an argument for a large, cheap, 20- or 30-year level-term policy that prices the actual exposure and expires when the mortgage is gone and the children are grown.

Term or permanent — which one fills this gap

The DIME gap is almost definitionally temporary: mortgages amortize to zero, children reach independence, income-replacement windows end. Temporary exposure maps to term insurance. Permanent (whole/universal) insurance serves genuinely permanent needs — estate liquidity for taxable estates, a special-needs child who will never be independent, business buy-sell funding. Buying a $250,000 whole-life policy to cover a 20-year mortgage is paying lifelong premiums for a duration mismatch; the coverage gap this tool measures is exactly the case level-term was designed to close at a fraction of the cost.

The employer group-life trap

Group life feels free because it usually is — one to two times salary, no underwriting, deducted from a paycheck. Two structural problems: it is not portable (change jobs, lose the coverage, now older and more expensive to insure privately), and it is rarely enough (one to two times salary against a DIME need that commonly runs seven to ten). Count it in "existing coverage" — this tool does — but size your owned policy so that losing the group benefit tomorrow does not leave a gap.

What a real policy costs, roughly

Profile$500k / 20-yr term$1M / 20-yr term
Healthy 30-year-old~$20–30/mo~$35–55/mo
Healthy 40-year-old~$30–50/mo~$60–95/mo
Healthy 50-year-old~$80–130/mo~$150–240/mo

Illustrative preferred-class ranges; tobacco use, health conditions, and hazardous occupations move these substantially. The point is the price of the DIME gap is usually far more affordable than people assume — the gap feels large because the obligation is, but term pricing for temporary exposure is not.

Hypothetical example

A 40-year-old earning $85,000 with $95,000 in debts, two children, and a plan to cover 20 years of income would estimate a coverage need near $1.1 million using the DIME-style method — income replacement plus debts and projected education costs, minus current savings.

Drop the income-replacement years to 10 and re-run the model, and the need falls by hundreds of thousands — which is why the assumptions matter more than the formula. This is a hypothetical illustration, not a recommendation to buy any specific policy.

What this calculator does not account for

  • Your actual premiums, health-class underwriting, and policy costs
  • Existing policies, employer-provided coverage, and Social Security survivor benefits
  • Inflation, investment-growth assumptions, and policy cash-value features
  • Estate-planning objectives, business buy-sell needs, and special-needs trusts

For executives & high-net-worth principals

The DIME model understates the life insurance need for high earners in two ways. First, the income-replacement years should run to the age your household actually needs the money, and for a high earner that usually means a multiple-of-income assumption that produces a seven-figure gap. Second — and uniquely — high-net-worth individuals may need life insurance for liquidity, not just replacement: to fund estate taxes, fund a buy-sell agreement so a business transfers cleanly, equalize inheritances between an heir who takes the business and one who does not, or protect a key person the enterprise depends on. For those needs, the coverage is often permanent rather than term. Run the DIME tool for the family number, then add a separate funded strategy for estate-liquidity and buy-sell obligations with an advisor who structures for high-net-worth scenarios.

What happens next

  1. Compare term life quotes for your computed coverage amount.
  2. Revisit the number after marriage, a mortgage, or a new child.
  3. Review beneficiaries every year. Life changes, forms do not.
  4. Consider laddering policies: larger term now, smaller later.

Frequently asked questions

How much life insurance do I actually need?

Run the DIME total, then subtract what you already own. Most working parents with a mortgage and young children land between seven and ten times gross income— materially more than the one-to-two-times group policy most people carry, which is precisely why the gap calculation exists.

What is the DIME formula?

Debt, Income replacement, Mortgage, Education: the four obligations a death benefit exists to cover. Sum them, subtract existing coverage and liquid assets, and the remainder is the coverage gap. It is the standard planner framework because it prices actual liabilities rather than an arbitrary income multiple.

Term or whole life for this?

Term, for the DIME gap: the obligations it prices (mortgage, child-raising, income replacement) are temporary, and level-term delivers the most death benefit per dollar for exactly those years. Permanent insurance serves permanent needs— estate liquidity, lifelong dependents, business succession— not a 20-year mortgage. Buying duration you do not need is how families end up underinsured and overcharged simultaneously.

Do I count my employer's group life insurance?

Yes, in "existing coverage"— with two caveats: it is typically one to two times salary, and it ends when employment does. Size your owned coverage so the group benefit is a bonus, not the foundation.

Is this financial advice, and is my data submitted?

No to both. This is an educational needs model, not a policy recommendation or a quote. Calculations run locally in this browser tab and inputs are not submitted to ClaimLedge. Compare stores a scenario on this device only when you choose it.

How much life insurance do I need?

Most financial advisors recommend 10-15 times your annual income, but your actual need depends on debts and future expenses.

Does life insurance planning differ for executives and high-net-worth individuals?

Yes. Beyond income replacement, high earners often need life insurance for estate liquidity — funding estate taxes without forcing a forced sale — and for business needs such as buy-sell agreements and key-person coverage. Those uses typically call for permanent coverage with a structure an advisor designs, layered on top of the personal family-needs number from a DIME-style model.

Should I include my spouse's income in the calculation?

Yes, from both sides. Where two incomes support one household, each partner needs cover calculated on the shortfall the survivor would face, and the survivor's costs rise for childcare and the services the other provided.

How often should coverage be recalculated?

After any change in income, a new child, a mortgage or refinance, a move, or a change in cover through work. Level term policies never adjust themselves, so the need and the policy drift apart unless the numbers are revisited.

Does a stay-at-home parent need life insurance?

Yes. Childcare, transport and household work carry replacement costs that the household is not currently paying in cash, and a death benefit based on those services is the honest measure rather than a figure tied to earned income.