Life Insurance coverage is an important part of everyone’s financial plan – but not everyone needs the same life insurance coverage. Your situation, obligations, and priorities are unique to you, and the amount of life insurance you need reflects that. This article will help you better understand three key things:

What’s life insurance – and why you need it

The basic concept is simple. Life insurance is an agreement between you and an insurance company: you agree to pay premiums and in return, the company agrees to pay a specific amount to your beneficiaries – typically your family – when you pass away. It can be reassuring to know that your loved ones will have additional resources if something were to happen to you.

There are two basic types of life insurance – permanent (like whole life) and term. With term life policies, you pay a specific premium for a defined term (say 10 years). If you pass away during that time, a death benefit is paid to your beneficiaries – but when the term is over you have to get new coverage, or go without. (There are a number of variations to this basic structure, but we won’t go into them here.)

Permanent life insurance, like whole life policies, are (generally speaking) designed to last for your entire life. A portion of your premiums are invested and over time this builds a “cash value” to your policy. That cash value gives you options: you can use it to pay for premiums later on (for example, when you retire) or you can “surrender” or give up the policy after your beneficiaries no longer need it, and get money to live on. (Again, there are all sorts of variations that we won’t go into now – but a Guardian representative would be happy to explain them all.)

Whichever kind of policy you get, you want a death benefit that’s large enough to cover the bills and expenses you won’t be able to help with if you’re gone. If you’re the primary income earner, that includes things like:

  • Replacing income from your job
  • Covering your mortgage or rent
  • Paying off debt, including credit cards and car loans
  • Saving for college

Even if you’re a part-time worker or stay-at-home parent, you should have enough insurance to pay for things like:

Basically, you need enough to cover all the extra costs your family would have in your absence, especially while your kids are still at home. And generally the more dependents you have – and the younger they are – the more life insurance you need.

General rules of thumb for determining how much life insurance you need

While you don’t know the future and you can’t foresee every possible expense your family might face in your absence, there are a few straightforward ways to start estimating your number:

1. Human Life Value*

Some financial representatives calculate the amount you need using the Human Life Value philosophy, which is your lifetime income potential: what you’re earning now, and what you expect to earn in the future.

In its simplest form, the philosophy suggests that you multiply your income by a variable based on factors such as age, occupation, projected working years, and current benefits.

As with every individual, the amount of recommended insurance you purchase depends on many factors. A simple way to get that number, however, is to multiply your salary times 30 if you are between the ages of 18 and 40. The calculation changes based on your age group, so please refer to the chart:


Maximum Life Insurance


30 times income


20 times income


15 times income


10 times income


1 times net worth


1/2 times net worth


case by case

2. Multiply your income by 10 – and add college for each child

This approach is almost as easy to figure out as the first rule, but also helps plan for opportunities like college for your children. How much should you add for each child? College isn’t cheap: you should account for somewhere between $100,000 and $150,000 per child. If you split the difference – and have 2 kids – that’s an extra $250,000.

3. Use the DIME formula

DIME stands for Debt, Income, Mortgage, and Education – the four big factors to consider when making a more detailed estimate of your life insurance needs:

Debt: Total all your debts other than your mortgage. Car payments, credit cards, student loans – even personal obligations such as money you may have borrowed from a sibling to put a down payment on your house. On top of all that, add about $7,000 for funeral expenses.

Income: How much do you make a year? And how many years will your family need that money? It’s a hard question to answer, but a good place to start is determining how many years until your youngest child graduates high school. For example, if you make $50,000 and have nine years until your youngest graduates high school, put down $450,000 for income.

Mortgage: Look at your last statement and get the pay off amount. If you have a second mortgage or HELOC (Home Equity Line of Credit) add that in as well (if you haven’t already included it in the debt section above).

Education: The anticipated cost for sending each of your children to college. As we said before, figure between $100,000 and $150,000 per child.

Add those four factors all up and that’s your number. You can also make adjustments (i.e., subtract) for any current savings and life insurance you already carry. The DIME method takes a little more work, but it’s also more precise – and you can probably get all the numbers you need in an hour or so by going through your files at home.

So what’s the best number for me?

That’s an easy question to answer: The best number for you is the one that gives you the most reassurance that your family will be taken care of – even if you’re not around to provide that care. Remember these general rules are just that – generalities that are not specific to you. Maybe you have other assets, such as a share in a small business. Or other obligations you’re concerned about, such as how to care for aging parents. Those specifics can get complicated pretty quickly – that’s why it’s always best to take the time to talk with someone who really understands life insurance.

Term life insurance calculator

Figure out how much you may need and what it could cost

Who can I talk to about life insurance?

That’s also easy. Just contact Guardian to find a representative who will do exactly what you need: Take the time to learn about your unique situation, listen to your concerns, and patiently explain the different insurance options that best fit your needs and your budget – from a company that’s been helping protect families for more than 150 years.

If you are an employee, taking advantage of your benefits at work is a smart and affordable way to get the financial protection you want for yourself and your family. Contact your HR department to review your plan details and determine how much life insurance is available to you. Your employer may provide life insurance as a benefit, or you may opt to pay for additional life insurance through payroll deductions.

Frequently asked questions about how much life insurance you need

What percentage of your income should you spend on life insurance? 

As a percentage of income a common rule of thumb is at least 6% of your gross income plus 1% for each dependent.

How much life insurance should a stay-at-home parent get? 

A stay-at-home parent should get enough life insurance to cover the costs incurred by the family if anything should happen to them. For example, the surviving parent may have to hire someone to take care of the home or watch any children.

What are the benefits of life insurance for women? 

There’s reason to believe women may need more life insurance than men, not less. Women are earning more than ever before and 41% of mothers are the sole or primary breadwinners for their families.1 And on average, women life 6-8 years longer than men2, yet they typically buy less life insurance coverage and save less for retirement than their male counterparts.

What is the lowest amount of insurance you can buy? 

Guardian has a minimum of $250,000 for a term life policy.

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