What is term life insurance?

Term life insurance provides coverage for a specific period (10, 15, 20, or 30 years). If you die during the term, your beneficiaries receive the death benefit. If you outlive the term, no benefit is paid. Term insurance is pure protection — no cash value accumulation. It is significantly cheaper than whole/permanent life insurance for the same death benefit, making it the preferred choice for most financial advisors for income replacement purposes.

Do I need life insurance if I'm single with no dependents?

Single people with no dependents generally don't need life insurance for income replacement purposes. Exceptions: significant debts with cosigners (student loans, business loans), outstanding parent or other financial obligation coverage, or pre-purchasing while healthy to lock in low rates before potential health changes. A simple funeral/end-of-life expense policy ($10,000–$25,000) may be practical regardless of family situation.

How long should a term life insurance policy be?

Match the term to your financial obligations timeline. Common approach: buy a 20-year policy when your children are young (enough to cover them through college), or a 30-year policy to coincide with mortgage payoff. By the time the term ends, your mortgage should be paid off, children should be financially independent, and your retirement savings should be substantial enough that surviving family isn't dependent on your income.

Life Insurance Calculator

The right amount of life insurance covers your family's financial obligations if you die: income replacement, mortgage, debts, and education costs. The DIME method calculates each component precisely so you don't over- or under-insure.

Enter your income, debts, dependents, and existing coverage to see how much life insurance you need and your current coverage gap.

Income & Dependents

Annual Income ($)

Years of Income to Replace Until youngest child is independent / spouse can support themselves

Number of Children

College Cost per Child ($)

Debts & Obligations

Mortgage Balance ($)

Other Debts (car, student loans, credit cards) ($)

Final Expenses (funeral, estate, etc.) ($)

Offsets

Existing Life Insurance Coverage ($)

Liquid Savings / Investments ($)

Annual Spouse/Partner Income ($)

                Recommended Coverage (DIME)
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                Coverage Gap
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Income Replacement Component —

Mortgage Component —

Debt + Final Expenses —

Education Component —

How to Calculate How Much Life Insurance You Need

The DIME method is the most comprehensive approach to calculating life insurance needs. DIME stands for: Debt (all non-mortgage obligations), Income (years of income replacement), Mortgage (remaining balance), Education (children's college costs). Add these four components, subtract existing coverage and liquid assets, and you have your coverage gap.

The simpler rule of thumb — 10–12× annual income — works as a quick estimate. A $85,000 income earner needs $850,000–$1,020,000 in coverage by this rule. The DIME method often produces similar or slightly higher numbers and gives you a clear breakdown of what each dollar of coverage is for.

Term vs. Whole Life Insurance

For most people, term life insurance is the right choice. A 20-year level term policy for a healthy 35-year-old nonsmoker costs approximately $25–$50/month for $500,000 in coverage. The same $500,000 in whole life insurance might cost $400–$600/month — 10–20× more. The difference: whole life accumulates cash value, while term is pure protection that expires when the term ends.

The standard advice: buy term and invest the difference. The extra $350–$550/month invested in low-cost index funds will build far more wealth than the cash value in a whole life policy over 20–30 years. Whole life makes sense in specific estate planning scenarios for high-net-worth individuals — for most working families, term is the correct choice.

Recommended Term Length

30-year term: Best for young couples (25–35) with new mortgages and young children — covers the full financial obligation period
20-year term: Best for those in their 30s–40s — covers children through college and mortgages to near-payoff
10-year term: Appropriate for older buyers (50+) with limited remaining obligations or supplemental coverage needs

Buy life insurance when you're young and healthy. Term life insurance rates are primarily driven by age and health at the time of application. A 30-year-old in good health pays $25–$40/month for $500K coverage. A 45-year-old in the same health pays $80–$120/month. Waiting 5–10 years to buy can more than double the cost. If you have dependents and haven't purchased yet, the best time to apply was yesterday.

For a complete guide to how much life insurance you need and how to choose between term and whole life, read how much life insurance do I need.

Frequently Asked Questions

How much life insurance do I need?

The DIME method: add up Debt (non-mortgage), Income replacement (annual income × years), Mortgage balance, and Education (college per child × children). Subtract existing coverage and liquid assets. The rule of thumb shortcut: 10–12× annual income. For an $85,000 income earner, that's $850,000–$1,020,000.

What is the DIME method?

DIME = Debt (all non-mortgage debts) + Income (years needed × annual income) + Mortgage (balance) + Education (college costs per child × number of children). It's the most thorough approach because it ties coverage to specific financial obligations rather than a generic multiple. Subtract existing coverage and liquid savings to get your net coverage gap.

Should I buy term or whole life insurance?

For most people: term. Term provides pure death benefit protection for a fixed period at a fraction of whole life costs. A healthy 35-year-old pays $25–$40/month for $500K 20-year term vs. $400–$600/month for equivalent whole life. Buy term and invest the difference in low-cost index funds — the math almost always favors this approach over whole life for wealth building.

How long should a term life policy be?

Match the term to your longest financial obligation. Common approach: 20-year term if children are young (covers through college + near mortgage payoff), 30-year term if you just bought a home and have very young children, 10-year term if you're nearing retirement with limited obligations. The policy should last until your family is financially self-sufficient without your income.

Do I need life insurance if I'm single?

Generally not for income replacement. Exceptions: significant debts with a cosigner (student loans, business debt), obligations to aging parents, or wanting to pre-purchase while healthy and rates are low. A small funeral expense policy ($10,000–$25,000) may be practical. Once you have dependents (spouse, children), income replacement coverage becomes essential.

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Net Worth Calculator → Emergency Fund → Monthly Budget → Retirement Calculator →

Formula sources & accuracy standards: Calculator Methodology · Editorial Policy