Guide

How Much Life Insurance Do I Need? The 15-Minute Math

Published 2026-07-22 · Updated 2026-07-27

A family of light beside a rising column of stacked gradient glass blocks with a beam marking the right height, measuring how much life insurance a family needs

Sizing life insurance starts with two lists rather than a formula: the debts that would land on a surviving household, and the income that would stop arriving. DIME organizes the first list by totaling non-mortgage Debt, Income replacement for a chosen number of years, the remaining Mortgage payoff, and projected Education costs, then subtracting liquid savings and any policy already in force. Guidance on income multiples is genuinely inconsistent, which is why a multiple works better as a sanity check on a calculated number than as the number itself. In Clark County the mortgage line usually dominates the total, and a large share of local households carry no employer life coverage at all because the work is tipped, commissioned, contracted or self-employed.

Quick Answer

A life insurance coverage target is what a household would owe plus what a household would lose, minus the money already standing behind those obligations.
The DIME framework (Debt, Income, Mortgage, Education) is one common way to build that total, and the arithmetic takes about fifteen minutes using statements already sitting in a filing cabinet.
Published rules of thumb disagree sharply. The National Association of Insurance Commissioners suggests five to eight times current income while adding that a question-by-question calculation produces a more accurate figure.
Employer group life insurance is usually a small multiple of salary and usually ends when the job ends, so workplace coverage rarely works as a foundation.
Social Security survivor benefits and existing savings shrink the gap, and both get left out of the math constantly.

Most households pick a life insurance number the way they pick a tip. Fast, round, based on nothing.

The number is the part that matters. Get it right and the product conversation gets short and boring, which is exactly what a product conversation should be. Get it wrong and no policy type saves the outcome. The arithmetic below takes about fifteen minutes and uses paperwork already in the house.

What is a life insurance policy actually replacing?

Two different things, and most shortcuts only count one. A death benefit covers the bills a household would inherit and the income a household would stop receiving.

The inherited bills are concrete. A mortgage balance, car loans, credit cards, private student loans that do not discharge at death, final expenses, and whatever it costs to settle an estate. Those numbers exist today and can be read off statements.

The lost income is the harder half. It is not just a salary. It is the employer share of health premiums that vanishes, the retirement contributions that stop, the second car that becomes necessary when one parent is doing every school run alone, and the years a surviving spouse may need to step back from work or step into different work.

Rules of thumb collapse both halves into one multiplier. That is why two households earning identical money can need wildly different coverage, and why the shortcut fails most often for the households with the least margin for error.

Which rule of thumb is right, five to eight times income or ten to twelve?

Neither one on its own. Income multiples are a sanity check, not a calculation, and the published guidance disagrees by a factor of roughly two.

The National Association of Insurance Commissioners consumer guidance on life insurance notes that some insurance experts suggest purchasing five to eight times current income, then immediately adds that working through a list of specific household questions produces a more accurate amount. Plenty of planners use ten to twelve times instead. Both camps are describing an average family that does not exist.

On a modest Las Vegas income, the distance between five times and twelve times is several hundred thousand dollars of death benefit. That is not a rounding error. That is the difference between a surviving spouse keeping the house and a surviving spouse listing it.

So use the multiple the way a carpenter uses a level. Build the number first, then check whether it lands in a sane range. If a calculated figure comes in at twenty times income, an input is probably wrong. If it comes in at two times, an obligation was probably missed.

What is the DIME framework, and where does it fall short?

DIME totals four categories: Debt, Income, Mortgage, Education. One framework among several, and it earns its place because every input comes off a document rather than out of a feeling.

Debt

Every non-mortgage balance. Credit cards, auto loans, personal loans, medical balances, and private student loans, which frequently do not discharge at death the way federal loans generally do. Co-signed debt belongs here too, because a co-signer stays on the hook.

Income

Annual income multiplied by the number of years a household would need support. Ten years is a common default. Households with toddlers often choose the number of years until the youngest child finishes school instead, which is a more honest horizon.

Mortgage

The payoff balance, not the monthly payment. In the Las Vegas valley this is usually the single largest line on the page, and it is the line that has grown the most over the last decade as valley housing costs climbed. A deeper look at how a death benefit interacts with a home loan sits in does life insurance pay off a mortgage.

Education

A realistic per-child figure for whatever schooling the household actually intends to fund. Not a national average pulled off a chart. If the plan is a state school with the child working part time, budget that.

Add the four, subtract liquid savings and any coverage already in force, and the remainder is the gap. The step-by-step version with the common input mistakes lives in what is the DIME method for life insurance.

What DIME misses

Four things, routinely. Final expenses and estate settlement costs, which DIME does not have a letter for. Childcare during the surviving parent’s working years, which is separate from education. Inflation across a twenty year horizon. And Social Security survivor benefits, which cut the other direction and are covered next.

Survivor benefits reduce the income gap, sometimes by a lot, and almost nobody includes them. Monthly payments can go to a spouse, a divorced spouse, children, or a dependent parent.

The Social Security Administration explains survivor benefits as monthly payments to eligible family members of someone who worked and paid Social Security taxes. Eligibility and amount both depend on the deceased worker’s earnings record, which means the figure is specific to the household and not guessable from the outside.

This matters more here than in most markets. A large share of Clark County works on 1099s, in commission roles, or in tipped hospitality positions, and self-employment tax funds the same system. What varies is the reported earnings history behind it. A household with a thin or uneven earnings record should look at the actual record rather than assume a benefit will be there. A household with a long steady record may find the survivor benefit closes a meaningful slice of the income line, which lowers the death benefit needed.

What does the arithmetic look like for a Las Vegas household?

Numbers make the shape visible, so here is one worked example. Every figure below is invented for illustration. None of it is a quote, a benchmark, or a prediction, and a real calculation would use the household’s own statements.

Picture a Henderson family. One spouse supervises a department at a Strip property. The other sells real estate on a 1099 and has no employer benefits of any kind. Two children, one in elementary school and one about to start.

DIME line	Illustrative figure
Non-mortgage debt (two auto loans, one card)	$41,000
Income replacement (household earned income, 12 years)	$684,000
Mortgage payoff balance	$372,000
Education (two children, in-state assumption)	$110,000
Subtotal	$1,207,000
Less liquid savings	$48,000
Less group life through the Strip employer	$95,000
Illustrative coverage gap	$1,064,000

Three things jump out of that table, and they are the same three things that jump out of most Clark County versions of it.

The mortgage is the biggest single obligation, which is why valley housing costs drive local coverage needs more than local incomes do. The 1099 spouse contributes roughly half the household earnings and carries zero employer coverage, which is the normal condition for real estate agents, rideshare drivers, contractors and independent stylists here. And the group life policy that felt like meaningful protection covers less than a tenth of the gap.

That last point is the one people argue with, right up until they see it in a table. More on why in is employer life insurance enough.

Does a parent without a paycheck need a number too?

Yes, sized to replacement cost instead of salary. A surviving partner has to buy back childcare, transportation, meals and household coordination at market rates while continuing to work full time.

The bill arrives the week after the funeral and does not wait for the estate to settle. Pricing it locally, using what full-time childcare and after-school care actually cost in the valley, usually produces a bigger number than people expect. The sizing method is walked through in does a stay-at-home parent need life insurance.

What changes the number after the first calculation?

Coverage need is a hill, not a flat line. It peaks during the mortgage-and-young-children years, then slopes down as the balance shrinks, the children finish school and retirement savings accumulate.

That shape has a structural consequence. A household does not need the peak number for thirty straight years, which is the entire argument behind laddering life insurance and a large part of the reason the term versus whole life decision comes after the coverage math rather than before it.

Recalculate when the shape changes. A new mortgage, a new child, a divorce, a business partner, a jump in income, or a move from W-2 employment into self-employment. That last one is common in this valley and it usually deletes the group life policy at the same time, which is worth knowing before the coverage is gone rather than after. What happens at the far end of a term policy is covered in what happens when a term life policy expires.

What sales pressure shows up around the coverage number?

Plenty, because the coverage number sets the commission. Life insurance is heavily commissioned and heavily oversold, and the pressure almost always lands on the number rather than on the product.

Four patterns worth recognizing:

The number gets inflated. Twenty-five times income, education budgeted at private-university rates, income replaced to age sixty-five with no survivor benefit credited. A bigger number justifies a bigger premium.

The number gets shrunk to fit a permanent premium. This one is more damaging. When the calculated need is a million dollars and the budget only buys a small permanent policy, the honest move is a large term policy. Selling a small permanent policy instead leaves the family catastrophically underinsured and calls it planning.

Urgency replaces arithmetic. Rates do rise with age, and that is true. It is not a reason to sign before the number exists.

The policy gets reframed as an asset. Cash value features get presented as savings or retirement income, and the coverage question quietly disappears. That framing is examined honestly in is whole life insurance a good investment.

The NAIC Life Insurance Buyer’s Guide puts the sequence in the right order: decide how much coverage is needed, for how long, and what is affordable, and only then compare policy types. The same consumer guidance warns that abandoning a policy in its early years can be expensive, which is what happens when someone is sold a premium the household cannot sustain.

Anyone advising on this in Nevada should hold an active producer license, and any resident can verify one through the Nevada Division of Insurance before signing anything.

What does Nevada specifically change about the answer?

Three local facts move the math, and one of them moves it in a direction most households have never considered.

Nevada is a community property state. The Consumer Financial Protection Bureau notes that a surviving spouse in a community property state may be required to use jointly held property to pay a deceased spouse’s debts, and Nevada is named on that list. That makes the Debt line in DIME considerably less theoretical here than in a separate-property state, and it is a good reason to bring an estate attorney into the conversation rather than treating the policy as the whole plan.

Nevada has no state income tax. A survivor’s take-home from a given salary stretches further here than in a state that taxes wages, which slightly reduces the income replacement line. Slightly. It does not offset a mortgage.

The workforce is unusually uncovered. Hospitality, gig, commission and self-employed households are a huge share of this valley, and none of that work comes with employer life insurance. In a Midwest manufacturing town, group life is a real floor. Here it is often zero, and the DIME gap is the whole obligation rather than the remainder after a benefit.

We are insurance nerds, not tax professionals. As a general matter, the Internal Revenue Service states that life insurance proceeds received by a beneficiary because of the insured’s death are generally not includable in gross income, while any interest paid on those proceeds is taxable and a policy transferred for value can change the treatment entirely. Anything past that general rule, including anything involving a business, a trust or an estate of size, belongs with a licensed tax professional and usually an attorney.

What happens once the number exists?

The number becomes a specification, and the shopping gets easy. Structure, term length, whether to ladder, whether any slice of the need is genuinely permanent, all of it follows from a figure that already exists instead of driving toward one.

The product should serve the strategy, not become the strategy. A coverage number is the strategy. Everything after it is procurement.

Take The Next Step

Bring the mortgage statement, the loan balances and the household income figures. A licensed ProtectHealth broker will run the number with you and tell you plainly if the honest answer is a smaller policy than you expected.

Book A Conversation

Households that want to read further before booking anything can start with the life insurance service overview, work through the Nevada buyer’s guide, or read about the licensed brokers on the ProtectHealth team. Fifteen minutes of arithmetic first. Everything else after.

Frequently Asked Questions

Is ten times income the right amount of life insurance?

Ten times income is one rule of thumb among several that disagree with each other. The National Association of Insurance Commissioners points to five to eight times current income and still recommends working through specific household questions instead. A calculated figure beats any multiple.

What does the DIME method include?

DIME totals four categories: all non-mortgage Debt, Income replacement for a chosen number of years, the remaining Mortgage payoff balance, and expected Education costs. Existing coverage and liquid savings come off that total, and the remainder is the gap.

Should employer life insurance count toward the coverage target?

Only as a temporary extra. Group life is typically a small multiple of salary and generally terminates when employment ends, which means the benefit disappears at the same moment household income does.

Do Social Security survivor benefits reduce the amount of life insurance needed?

Often yes. Survivor benefits pay monthly amounts to eligible spouses, divorced spouses, children and dependent parents based on the deceased worker's earnings record. Eligibility and amount vary, so the earnings record deserves a look rather than an assumption.

Does a parent without a paycheck need life insurance?

Yes, sized to replacement cost rather than salary. A surviving partner would have to purchase childcare, transportation and household management at market rates while continuing to work, and that bill arrives immediately.

What's the next step?

The right life insurance answer depends on income, debts, and the people counting on you. ProtectHealth builds the strategy first, then matches the policy.

Explore Life Insurance Strategy

ProtectHealth brokers are insurance professionals, not tax professionals. Nothing on this page implies every self-employed person or business automatically qualifies for any specific structure. Eligibility depends on business structure, income, and household situation. When tax or business structure enters the conversation, a brief chat with a licensed tax professional is a make-sense next step.