How Much Life Insurance Do You Really Need?

September 2, 2025

For more than 10 years, September has been known as Life Insurance Awareness Month. This national initiative inspires us to remember that thoughtful planning with life insurance provides lasting protection for loved ones.

But life insurance provides more than just financial security; it gives you peace of mind, knowing your family will be cared for no matter what. Now is a perfect time to review your coverage or even start a new policy if needed.

You may be thinking, “How much life insurance do I really need?” As you consider your options, we’re here to help you find the answer — and more.

Why the Right Amount of Life Insurance Matters

There’s a sweet spot when it comes to life insurance — too little coverage can leave loved ones financially vulnerable; too much might cost more than needed. The right amount factors in real-life costs for expenses like mortgage payments, childcare, and income replacement.

Unfortunately, insufficient coverage remains a common problem. According to 2025 data from the Life Insurance Marketing and Research Association (LIMRA), 40% of Americans say they need more coverage — which adds up to nearly 100 million U.S. adults. In addition, LIMRA found that 47% of respondents indicated they’d have trouble paying the bills within six months of the primary wage earner’s death.

How To Calculate Your Life Insurance Needs

The debt, income, mortgage, and education (DIME) method serves as a practical way to determine your basic life insurance needs. Here’s how it works:

Step 1: Determine your debt. Do you have car loans, student loans, or credit card debt?
Step 2: To maintain your standard of living, calculate 10 times your annual income. If your income is $80,000 per year, that means $800,000.
Step 3: Determine how much you have left to pay on your mortgage.
Step 4: What will it cost to send your kids to college? Do they attend private schools for elementary, middle, or high school? For college, estimate $100,000 per child.

Using this framework, if a family had zero debt, a yearly income of $80,000, $200,000 left on their mortgage, and two college educations to fund, the calculation would yield $1.2 million in life insurance ($800,000 + $200,000 + $200,000) — assuming each child needed $100,000 for their college education.

Using an example of two single adults with no debt, making $80,000 each, with $200,000 left on their mortgage, and no college tuition to fund, the target amount would be $1.8 million for life insurance.

Again, if we used a similar example for two retirees with a paid-off home who promised to pay half of their grandchild’s education, their life insurance should amount to $50,000: $0 (debt) + $0 income (because they are living off of retirement like pensions and Social Security) + $0 mortgage + $50,000 (half a college education).

Although the DIME method provides a great place to start, it helps to talk to a financial expert for more personalized information. 1891 Financial Life offers a free financial needs analysis and an interactive life insurance calculator.

Common Mistakes To Avoid When Estimating Coverage

Beware common pitfalls when purchasing life insurance. The first mistake is to think of life insurance as an answer to short-term problems, like paying for funeral costs. But what about the income the survivor will now miss for the rest of their life?

Another misstep is relying solely on employer-provided insurance. It's great that your company offers it, but the payouts are often too low for what you actually need. In addition, you’ll lose your policy immediately in a layoff or if you accept a position at a new company.

Lastly, people tend to ignore major life events and not update their coverage. The original policy someone purchased when they were single, for instance, will no longer realistically fit their needs if they now have a spouse, kids, and property.

Planning With Purpose

The best way to make life insurance work for you is to match coverage to your personal and family goals, and then adjust as your needs change.

1891 Financial Life is here to help you with every step. We offer members the fraternal difference — coverage with community support, such as discount programs, scholarships, awards, and more.

At 1891 Financial Life, we specialize in providing tailored insurance solutions that cater to diverse needs. Our team is equipped to help you navigate these challenges with expertise and compassion. Contact us today for personalized assistance and to explore your options.

About 1891 Financial Life

Our culture is about looking out — for you, for others, for family, for the community. That is how we go “Beyond Life Insurance.”

At 1891 Financial Life, we don’t just sell policies, we offer possibilities. We pride ourselves on giving back to the communities that we serve by providing quality and comprehensive insurance solutions. We are a not-for-profit life insurance Society, which means the sales from these financial service products help fund member benefits along with social, educational, and volunteer programs designed to respond to community needs. In 2023, 1891 Financial Life was listed by Forbes as one of “The World’s Best Life Insurance Companies.”

Our portfolio is extensive, ranging from various life insurance policies to our annuities to support your financial needs no matter what stage of life you’re in.