How to Use This Calculator

Enter your annual income, your outstanding mortgage and other debt, and your number of dependents. The calculator applies a widely used rule-of-thumb formula to estimate a reasonable starting point for how much term life insurance coverage to consider.

This is meant as a conversation-starter, not a final answer — a licensed insurance professional can account for factors this simple formula can't, like your spouse's income, existing coverage, final expenses, and education goals.

What the Inputs Mean

  • Annual Income: Your gross annual income — the formula replaces this income for a period of years if you're no longer there to earn it.
  • Mortgage / Debt: Your total outstanding debt, including your mortgage balance, so a payout could clear it entirely rather than burden your family.
  • Dependents: The number of people who financially depend on you — each adds a buffer toward costs like childcare, education, or ongoing support.

Assumptions & Formula

  • This uses a common "10x income plus debt" rule of thumb: 10 years of income replacement, your total debt paid off in full, and a flat $100,000 buffer per dependent for costs like education or childcare.
  • It does not account for existing life insurance coverage, a spouse's or partner's income, final expenses, retirement savings goals, or your specific family's cost of living — all of which a licensed agent would typically factor in.
  • This is a simplified rule of thumb, not personalized financial or insurance advice.

Formula: Recommended Coverage = (Annual Income × 10) + Total Debt + (Dependents × $100,000).

Worked Example

Someone earning $75,000 per year with $250,000 in combined mortgage and other debt and 2 dependents would calculate: ($75,000 × 10) + $250,000 + (2 × $100,000) = $750,000 + $250,000 + $200,000 = $1,200,000 in recommended coverage — a useful starting figure to bring into a conversation with an insurance professional, who can refine it based on your full financial picture.

Frequently Asked Questions

Is 10x my income the right amount for everyone?

It's a common industry rule of thumb, not a universal answer. Your ideal coverage depends on your dependents' ages, a spouse's income, existing savings, and how long you want income replaced — a licensed agent can help tailor the number.

Should I include my mortgage in the debt I enter?

Yes — most people want a policy large enough to pay off the mortgage entirely, so their family isn't carrying that payment without their income.

What's the difference between term and whole life insurance?

Term life insurance covers you for a fixed period (e.g., 20 years) at a lower cost and is what most people mean by "needs-based" coverage like this calculator estimates. Whole life insurance lasts your entire life and includes a savings component, at a significantly higher cost.

Do I need coverage if I don't have dependents?

Possibly less — this calculator's dependent buffer won't apply, but you may still want coverage for debt (like a mortgage with a co-signer) or final expenses.

Sources

  • Methodology note — The 10x-income-plus-debt formula is a widely cited industry rule of thumb, not pulled from a live data feed or personalized underwriting.