What amount of life insurance does my client need?

Helping a client decide the right amount of life insurance they need can be difficult. Here are some easy ways to determine a baseline!

A new client has come to you asking for help creating a life insurance policy; that’s great! Those seeking life insurance help already know that life coverage is an important financial investment, but few are aware of the amount of life insurance coverage they actually need. Fortunately, there are a few general approaches you can use as a starting point to help your clients decide on the right life insurance amount for their family’s needs.

Just over half of American adults have life insurance policies, and the percentage of policyholders has slowly dropped by 9 percent since 2011. Of those with life insurance coverage, almost one-third only have group coverage, usually through an employer, which is rarely enough and typically contingent on the policyholder being employed by the company at the time of death. Of those insured, 40 percent say they regret not purchasing life insurance while they were younger.

One of the most important factors keeping individuals from purchasing life insurance is not knowing where to start. As an agent, it is vital that you understand your clients’ needs and help them create a custom plan to decide on an amount of life insurance to purchase. There are several general rules of thumb agents and consumers can use as a starting point for choosing the right coverage option.

Multiply the client’s income by 10.

Multiplying a client’s income by 10 is one of the simplest and longest-standing methods of determining necessary life insurance policy amounts. This method is rather outdated, as it does not account for rising interest rates and other aspects of the modern economy, nor does it allow room to consider a family’s specific needs or assets, but it can be used as a simplistic way to find a coverage baseline.

Multiply the client’s income by 10 and add $100,000 per child for higher education.

This technique, like the first, acts as a great starting point for discussions about coverage amounts. Though it still leaves out specific familial needs and existing savings or assets, this approach includes the baseline amount of ten times the policyholder’s annual income and adds enough coverage to significantly lower each child’s future higher education costs.

The DIME Formula

The DIME formula is the most well-rounded approach of the three and includes four crucial financial elements: debt & final expenses, income, mortgages, and education. By examining each of these aspects, agents and policyholders gain a more well-rounded view of how much life insurance they need, but the DIME formula still does not account for any existing assets or savings.

When helping a client invest in a new life insurance policy, the amount of coverage they need is specific to their family’s needs and financial situation. By examining their finances and their family’s needs, you can help protect the entire family from financial hardship should they lose their loved one.


We hope this information on helping your clients find the right amount of health insurance is helpful to you.

Empower Brokerage is dedicated to helping you educate your clients on the insurance they need and staying on top of their health. Whether it’s through webinar training, one-on-one calls, seminars, or marketing plans. We want you to be successful. Give us a call if you have any questions 888-539-1633.

Quick Links:

• Get Customized Marketing Materials