Every time I sit down with a new client to talk about life insurance, they say the same thing: "I heard I need 10 times my income." Like it's a magic number handed down from some insurance mountain. It's not. It's a rule of thumb created in the 1980s when houses cost $80,000 and college was $2,000 a year. In 2026, that rule is not just outdated — it's dangerous.
Let me tell you about Robert. He was a client of mine from 2019 until last year. Electrical engineer, made $95,000 a year. Married, two kids — ages 8 and 11. Bought a house in Littleton for $420,000 in 2017. Had a $350,000 mortgage. Car loans totaling $45,000. Credit card debt around $12,000. Pretty typical Denver family.
👨👩👧👦 Life Insurance Needs Why the 10x rule is wrong All data stays in your browser.
Robert came to me because his work policy was ending when he changed jobs. He had $150,000 in group life insurance through his employer. He wanted to know if he needed more. I ran the numbers.
"According to the 10x rule," I told him, "you need $950,000."
"That sounds like a lot," he said.
"It is. But it's also probably not enough."
I pulled out my calculator and showed him the real math. Not the rule-of-thumb math. The actual math his family would face if he died tomorrow.
First, the mortgage. $350,000. If Robert died, his wife Sarah would need to keep paying the mortgage or sell the house. Selling a house while grieving, with two kids, in a market that might be down, is a nightmare. Most families want to stay in the house. So that's $350,000 right there.
Second, the kids' college. His daughter was 11. She'd be starting college in 7 years. His son was 8, so 10 years. In-state tuition at CU Boulder is about $14,000 a year now. By the time his daughter starts, it'll be closer to $18,000. Four years: $72,000. His son: another $80,000. Total college fund needed: $152,000. And that's assuming they both go in-state and live at home. If they want to go out of state or live on campus, double it.
Third, debt. The cars, credit cards, personal loans: $57,000. Sarah would need to pay those off or keep making payments while living on one income. One income that just dropped by $95,000 a year.
Fourth, income replacement. Sarah made $42,000 as a part-time office manager. Could she go full-time? Maybe. But now she's a single parent to two grieving kids. She might need to cut back, not work more. Let's say she needs to replace Robert's income for at least 10 years to keep the family stable. That's $950,000.
Add it up: $350,000 mortgage + $152,000 college + $57,000 debt + $950,000 income replacement = $1,509,000.
The 10x rule said $950,000. The real need was $1.5 million. He was underinsured by $559,000.
Robert stared at the numbers for a long time. Then he said something I'll never forget: "I don't want my wife to have to choose between keeping the house and sending the kids to college."
We ended up getting him a $1.5 million 20-year term policy. Cost: $87 a month. He complained about the price for exactly one day. Then he went home, looked at his kids, and called me back to say thank you.
nHere's why the 10x rule fails so badly: it was created in an era when the average home cost 3x annual income, college was affordable, and most families had one income. Today, the average home in Denver costs 6-8x annual income. College costs have risen 1,200% since 1980. Most families have two incomes, which means losing one is catastrophic, not just difficult.
The 10x rule also completely ignores debt. It assumes your mortgage and car loans just disappear. They don't. Your family still owes them. If you don't have enough insurance to cover them, your spouse is either selling assets or drowning in payments.
And it ignores inflation. $950,000 today won't be worth $950,000 in 10 years. College costs rise 5-8% annually. Healthcare costs rise even faster. The $1,500 a month your family needs today might be $2,200 in 10 years.
I see this mistake constantly. People buy a $500,000 policy because some online calculator said "10x income" and they make $50,000. Then they have a $300,000 mortgage, $40,000 in car loans, two kids who need college, and a spouse who makes $30,000 part-time. The math doesn't work. It never worked. But the 10x rule made them feel like they were doing the right thing.
After Robert passed away last year — heart attack, completely unexpected, he was 47 and ran marathons — I got a call from Sarah. She was crying, but she also kept saying thank you. The $1.5 million policy paid out in three weeks. She paid off the mortgage. She paid off the debt. She put $200,000 into a college fund. And she had enough left to cover living expenses for 8 years while she figured out what came next.
"I don't know what I would have done with $500,000," she told me. "I would have had to sell the house. The kids would have had to change schools. Everything would have been different."
That's the difference between a rule of thumb and real math. One feels good. The other actually works when your family needs it.
So here's what I tell people now: don't use the 10x rule. Use the DIME formula. Debt, Income, Mortgage, Education. Add up your total debt, multiply your income by the number of years your family needs support, add your mortgage balance, add estimated college costs. That's your real number.
It's usually 12-20x income, not 10x. And yes, the premium is higher. But you know what's more expensive? Being underinsured when your family needs the money most.
Robert's $87 a month seemed like a lot when he was healthy and employed. After he died, it was the best investment he ever made. Sarah told me she would have paid $500 a month if she'd known what was coming.
None of us know what's coming. That's the whole point of insurance. But buying too little because of a 40-year-old rule of thumb? That's not being cautious. That's being reckless with your family's future.
— Marcus, Denver
