Somebody told you ten times your income. Or eight. Or that $500,000 sounds about right. Round numbers are how this conversation usually goes, and they're how households end up either badly underinsured or paying for coverage they didn't need.
There's a better way to do it, it takes about fifteen minutes, and it's arithmetic rather than judgment. This guide walks through it.
Two things I'll be upfront about. I'm an insurance agent, not a financial planner or a tax advisor — for questions about estate planning, taxes, or how life insurance fits a broader financial strategy, a qualified professional in those fields is the right call — and if the worry is protecting assets from a liability claim rather than replacing income, that is an umbrella policy question. If you're weighing this alongside your other policies, the bundling guide covers how multi-policy pricing actually works. And I can't tell you what a policy will cost you until we know your age, health, and the amount and term you actually need. The amount comes first. That's what this page is for.
Why isn't "ten times your income" the answer?
The short answer: Because it's a rule of thumb built for an average household, and it ignores the four things that actually determine the number — your debts, your mortgage, how many years of support your family needs, and what you've already got.
Multiples of income are popular because they're easy, and they're not useless — as a sanity check they're fine. As an answer they fall apart quickly.
Consider two people who each earn $90,000. The first is 34, has a $310,000 mortgage, two children under six, $40,000 in student loans, and $15,000 saved. The second is 56, has paid off the house, has no dependents at home, and has substantial retirement savings.
Ten times income says both need $900,000. In reality the first household's need is considerably larger than that and the second's is a fraction of it. Same income, completely different obligations.
The multiple also quietly ignores the biggest variable of all: how many years your family would need the money to last. A household with a newborn needs support through roughly two more decades. A household whose youngest is 16 needs a much shorter runway. That difference is worth hundreds of thousands of dollars, and no income multiple captures it.
What is the DIME method, and how do you run it?
The short answer: Add up Debt, Income replacement, Mortgage, and Education. Subtract existing coverage and savings. What's left is roughly your gap.
DIME is the standard needs-analysis framework, and it's genuinely something you can do at a kitchen table. Four categories:
Debt
Everything that isn't the mortgage — credit cards, car loans, student loans, personal loans, medical debt. Plus final expenses: funeral costs, and any medical bills that would follow.
Income replacement
Your annual take-home contribution multiplied by the number of years your household would need it. This is usually the biggest single line, and the number of years matters more than most people expect.
Mortgage
The remaining balance on your home. Paying it off means the surviving household isn't making a mortgage payment out of a reduced income — which is often the difference between staying and moving.
Education
What you'd want available for your children's schooling. Be honest about the standard you're planning for rather than the one that sounds impressive.
What you already have
Existing individual policies, group coverage through work, savings and investments earmarked for the family, and any pension or survivor benefits.
Childcare and transition costs
Often missed. If one parent's income disappears, the surviving parent may need paid childcare to keep working — or may need time away from work entirely.
D — car loan $18,000, credit cards $6,000, final expenses $12,000 → $36,000
I — $65,000 of take-home contribution × 15 years until the youngest finishes school → $975,000
M — remaining mortgage balance → $295,000
E — $60,000 set aside per child → $120,000
Subtotal: $1,426,000. Now subtract what exists — $150,000 of group coverage through work and $70,000 in accessible savings — leaving a gap of roughly $1,206,000.
That number surprises people, and it should prompt a real conversation rather than a purchase. Maybe the income replacement runs 10 years instead of 15. Maybe education is a partial goal. The point of DIME isn't to produce an intimidating figure — it's to make each assumption visible so you can argue with it. Figures are illustrative only.
Notice that the largest line by far is income replacement, and it's driven by a number you choose: how many years. That's the assumption worth spending your thinking on. Everything else is mostly lookup.
What should a Texas household account for specifically?
The short answer: Property taxes that keep coming regardless of income, and the fact that Texas is a community property state — which affects how debts and assets are treated.
Most of DIME is the same anywhere. A few Texas details are worth folding in.
Property taxes don't stop. Texas has no state income tax, which is a genuine advantage while you're earning. The trade-off is that Texas leans heavily on property taxes, and those bills arrive every year whether or not the household still has two incomes. When you calculate the mortgage line in DIME, remember that paying off the house doesn't eliminate the annual cost of keeping it — taxes and insurance continue — and Texas home insurance has itself risen sharply, so that ongoing figure is larger than it used to be. For many families that's a meaningful ongoing number worth adding to the income replacement side.
Texas is a community property state. Property and debts acquired during a marriage are generally treated as belonging to both spouses, which can affect what a surviving spouse becomes responsible for. The specifics depend on the debt and how it was incurred, and this is genuinely a question for an attorney rather than an insurance agent — but it's a reason not to assume debts simply disappear.
Homestead protections exist, but they're not a plan. Texas homestead law offers meaningful protection for a primary residence from certain creditors. It doesn't pay your mortgage, and it doesn't replace income. Don't let it substitute for coverage.
How long do you need the coverage to last?
The short answer: Until the obligations you're insuring against are gone — usually the year your youngest finishes school or the mortgage is paid, whichever is later.
The amount gets all the attention and the term gets almost none, which is backwards. A policy that pays generously but expires three years too early has failed at the exact thing you bought it for.
The way I'd think about it: list the obligations you identified in DIME and ask when each one ends. The mortgage has a payoff date. The youngest child finishes school in a specific year. The student loans amortize on a schedule. Your term should reach past the last of those dates, with some margin.
| What you're protecting | When the obligation ends | Term implication |
|---|---|---|
| Young children at home | Youngest finishes school or college | Usually the longest driver |
| Mortgage balance | Scheduled payoff date | Match or exceed remaining years |
| Student or personal loans | Amortization schedule | Often the shortest |
| Spouse's retirement security | When retirement assets are sufficient | Depends on savings pace |
| Business obligation or loan guarantee | Loan term or buy-sell agreement | Match the agreement |
A related trap: buying a term that ends right when you'd be hardest to insure again. Health changes as people age, and a policy purchased at 35 was underwritten on a 35-year-old. If that policy ends at 55 and you still have a need, you're buying again at 55 — with whatever health history you've accumulated. Building in margin at the start is generally cheaper than re-buying later.
What about a stay-at-home parent?
The short answer: They need coverage, because the work they do would have to be paid for if it stopped — and that cost lands on a household that just lost a person.
This is the coverage gap I see most often, and the reasoning behind skipping it always sounds sensible: no paycheck, no income to replace.
But run the replacement cost. Full-time childcare for two young children. After-school care. Someone to handle the household logistics the surviving parent now has to do alone while working full time. In a metro like DFW those are not small numbers, and they arrive at the same moment as the grief.
There's also a scenario people don't picture: the surviving parent may need to reduce their hours or step back from work entirely, at least for a while. Coverage on a non-earning parent is what buys that flexibility.
The amount is usually smaller than for the primary earner, and the calculation is different — you're pricing replacement services and transition time rather than replacing wages. But zero is rarely the right answer.
What do people get wrong most often?
The short answer: Counting on group coverage alone, never updating the amount, forgetting beneficiaries, and assuming it's unaffordable without checking.
- Treating employer coverage as the whole plan. Group life through work is a real benefit and usually a modest multiple of salary. The catch is that it typically ends when the job does — and job changes rarely happen at convenient moments.
- Never revisiting the number. The amount that fit when you bought a starter home and had one child doesn't fit after a second child and a bigger mortgage. Life insurance is not a set-and-forget purchase.
- Stale beneficiary designations. The beneficiary named on the policy generally controls, regardless of what your will says. After a marriage, divorce, or death in the family, check it. This takes five minutes and gets skipped for decades.
- Assuming it's too expensive without asking. Per LIMRA, about three-quarters of adults overestimate the cost, and 46% of those with a coverage gap cite cost as their reason for not buying. That's a lot of households declining something on a price they never actually got.
- Waiting for a health event to prompt the conversation. Life insurance is underwritten on your health at application. The best time to buy is while you don't feel any urgency about it.
How do you get your actual number?
The short answer: Run DIME with real figures, decide the term, then get quoted at that amount. Fifteen minutes, and the arithmetic is the hard part — not the paperwork.
What I need to run it with you: your household income and roughly what portion is take-home, your mortgage balance and remaining years, other debts, the ages of any children, what you'd want available for education, any existing coverage including through work, and accessible savings.
What you'll get back is a number with every assumption visible, so you can push on any of them. If fifteen years of income replacement feels too long, we change it and watch the figure move. That's a much better conversation than picking a round number and hoping.
The bottom line
The short answer: The right amount comes from your obligations, not from a multiple of your salary — and it's almost certainly more affordable than you're assuming.
Life insurance is the product people most often buy by guessing and most often skip on a price they never asked for. Both of those are fixable in one conversation.
Run the arithmetic first. Debt, income for a number of years you choose deliberately, mortgage, education — minus what you already have. Argue with the assumptions until the number feels honest rather than impressive or frightening. Then, and only then, find out what it costs, because that figure is very often not what people expect.
If you want it run for your household, send me the details and I'll do it and show my work. I'm in Richardson, I do this in English and Spanish, and there's a $10 e-gift card just for letting me prepare the quote.
Last reviewed by Jaime Mendez on August 25, 2026. This guide is educational and is not personalized insurance, legal, tax, or financial advice — coverage amounts, policy suitability, estate planning and tax treatment depend on your circumstances and are worth discussing with the appropriate qualified professional. Availability of coverage is subject to underwriting. This guide is refreshed quarterly.
