How Much Life Insurance Do You Need?

Most people guess, and most people guess low. The DIME method takes about two minutes and gives you a number you can plan around, because it adds up four real obligations instead of a rule of thumb.

The DIME calculator

Five quick questions, and then you see your number on the next screen. Start with the Canopy Number calculator. It subtracts the savings and coverage you already hold, so you only see the gap you actually need to fill.

What DIME stands for

• D. Debt: credit cards, car loans, personal loans and student loans. Add the balances your family would have to clear without your paycheck.
• I. Income: the number of years your family would need your income to stay on their feet. Twenty years covers a child through college, and ten years covers the gap for a household with no children at home.
• M. Mortgage: the remaining balance, so the house never becomes the thing that forces a move.
• E. Education: what you want to cover per child. A public university degree in most states runs well into five figures, and private schools cost more.

Two worked examples

Example one. A 34 year old earns $72,000, owes $310,000 on the house, and raises two children. Twenty years of income replacement adds up to $1,440,000, education adds $200,000, and the mortgage adds $310,000, so the total need reaches $1,950,000. The family holds $40,000 in savings and $150,000 of group coverage through work, which offsets $190,000. The gap lands at $1,760,000, and the calculator rounds it to a Canopy Number of $1,750,000.

Example two. A single 58 year old earns $95,000, owes $120,000 on the house, and has no children at home. Ten years of income replacement adds up to $950,000, and the mortgage adds $120,000, so the need reaches $1,070,000. Savings of $320,000 and an existing $250,000 policy offset $570,000, which leaves a Canopy Number of $500,000. Same method, very different answer, because the obligations differ.

What people get wrong

• Insuring only one spouse when the other stays home with the kids, even though the mortgage, the bills and the childcare still depend on both of you.
• Counting the mortgage but forgetting the car loans, the credit cards and the years of lost income.
• Choosing the cheapest number instead of the number that actually holds the family’s life together.
• Waiting. The same coverage costs more every year you delay, and a new diagnosis can close doors that are open today.

Questions people ask about coverage amounts

Is ten times my income enough? Sometimes, and it depends on your mortgage, your debts and how long your family needs the money. Run the numbers before you trust the shortcut. Should I count my 401(k)? Yes, and count it honestly, because your family would draw on it at the worst possible time. What if my spouse earns more than I do? You still carry replacement costs, especially childcare, and coverage usually still makes sense. Do I need coverage after the kids grow up? Many people keep a smaller policy for final expenses and a surviving spouse’s income gap. Can I change my coverage later? Yes. You can add coverage when your obligations grow, and you can drop it when they shrink.

Two ways to move forward

Run your own numbers, and then compare real rates. The calculator takes about a minute, and it shows your Canopy Number on the next screen. After that, an agent shops carriers for you and brings back actual quotes for your age and your state.

Prefer to talk it through first? Call (208) 996-3578 and a licensed agent will walk you through the same questions.

Canopy Insurance Partners is licensed in Idaho, Washington, Oregon, Georgia, Tennessee, Texas, Mississippi and Arkansas. Your Canopy Number is an educational estimate based on the numbers you enter, not a quote and not an offer of insurance. Actual coverage and rates depend on the carrier, your age, your health and your state. We are not affiliated with any government agency. By submitting your information you agree that we may contact you by phone, email or text about life insurance options, and you can opt out at any time.