If you have ever stared at a life‑insurance quote and wondered whether “$250,000” or “$1,000,000” is the right number, you are not alone — and the honest answer is that the coverage amount matters far more than most people realize. Buy too little and your family faces a shortfall at the worst possible moment. Buy far more than you need and you may strain a budget that has to keep the policy in force for decades.
This guide walks through how much life insurance a typical Sioux Falls or elsewhere in South Dakota family should consider in 2026, using a transparent method you can follow on paper, real cost figures, and a worked example. It is educational, not a quote — but by the end you should have a defensible target number to bring to a conversation.
The short version
Add up what your family would need to replace and pay off, subtract what you already have, and the gap is your coverage target. For many working parents that lands somewhere between 10 and 15 times income, plus the mortgage — but your real number depends on your specific responsibilities.
The coverage gap is bigger than most families think
Nationally, the picture is sobering. According to LIMRA’s 2025 Insurance Barometer Study, only about 37% of U.S. adults own individual life insurance, and roughly 23% are covered through work. More striking: an estimated 74 million American adults say they need life insurance but don’t have it, and another 25 million believe they are underinsured.
Part of the problem is a pricing myth. More than half of Americans overestimate the cost of coverage — often by three or four times — which keeps people from even getting a quote. The reality is that a healthy adult can frequently buy a large amount of term coverage for a very manageable monthly premium, especially when they lock it in young.
For a family in Minnehaha or Lincoln County, the takeaway is simple: don’t let a guess about price talk you out of running the numbers. Sizing the coverage correctly comes first; the cost almost always turns out to be lower than people expect.
Start with what you’re actually protecting
Life insurance isn’t really about you — it’s about the people and obligations that depend on your income. Before you pick a number, list what your family would have to handle if your paycheck disappeared tomorrow:
- Income replacement — the years of earnings your household relies on.
- The mortgage — usually the single largest debt, and the thing families most want to protect.
- Other debts — vehicle loans, credit cards, co‑signed student loans.
- Childcare and future costs — daycare today, and college or trade school later.
- Final expenses — funeral and end‑of‑life costs (more on those below).
Then subtract what you already have working in your favor: existing life insurance (including any employer group coverage) and savings earmarked for your family. What’s left is the gap a policy is meant to fill.
Two ways to size it: the multiple, and the DIME method
There are two common approaches. The quick one is an income multiple — many advisors start around 10 to 15 times your annual income, which builds in a cushion for inflation and future costs. It’s a fine sanity check, but it ignores your specific debts and goals.
The more accurate approach is the DIME method, which adds up four buckets:
- D — Debt: all debts other than the mortgage.
- I — Income: your annual income times the number of years your family would need it.
- M — Mortgage: your remaining mortgage balance.
- E — Education: estimated future costs for your children.
Add those four, subtract savings and existing coverage, and you have a target that reflects your household rather than a rule of thumb. Our life‑insurance needs calculator runs this math for you in about a minute.
Why the mortgage gets its own bucket
For most South Dakota homeowners the mortgage is the biggest single number in the calculation — and keeping the family in the home is the goal people care about most. If a home is central to your plan, consider our dedicated mortgage protection page alongside a general policy.
A worked example: the Sandersons of Sioux Falls
Let’s make it concrete. Imagine a two‑income household in Sioux Falls. According to the U.S. Census Bureau’s QuickFacts for Sioux Falls, the city’s median household income sits in the low‑$70,000s — so we’ll use a primary earner making $75,000. They have two young children, a $240,000 mortgage balance, $25,000 in other debts, and $20,000 in savings. They want to replace income for 15 years and set aside $120,000 for future education.
Here’s the DIME math:
| Bucket | Amount |
|---|---|
| Debt (non‑mortgage) | $25,000 |
| Income ($75,000 × 15 years) | $1,125,000 |
| Mortgage | $240,000 |
| Education | $120,000 |
| Subtotal (needs) | $1,510,000 |
| Minus savings | −$20,000 |
| Estimated coverage gap | ≈ $1,490,000 |
That surprises people — but notice it’s mostly income replacement. If the Sandersons felt $1.49M was more than their budget could sustain, they might trim the replacement window to 10 years (bringing income to $750,000) and land near $1.1 million, or blend a large term policy for the working years with a smaller permanent policy for lifelong needs.
Where the coverage goes — the Sanderson example
Illustrative example using the DIME method; not a quote. Bars scaled to dollar amounts.
Don’t forget final expenses and the “hidden” costs
Two categories quietly push the number up. The first is final expenses. According to the National Funeral Directors Association, the median cost of a funeral with viewing and burial reached $8,300, and a funeral with cremation runs about $6,280. Families who don’t build this into the plan often end up covering it out of savings — exactly when savings are needed most. If final costs are your main concern, our final‑expense planner can help you estimate a realistic figure.
The second is the value of unpaid work. If one parent stays home, replacing their childcare, transportation, and household labor is a real expense. Insure both parents — a stay‑at‑home parent’s contribution can justify several hundred thousand dollars of coverage on its own. We cover this in depth on our life insurance for young families page.
Key takeaways
- Size coverage to your responsibilities: income, mortgage, debts, education, and final expenses — minus savings and existing coverage.
- The DIME method is more accurate than a flat income multiple, but 10–15× income is a reasonable sanity check.
- Insure both parents, including a stay‑at‑home parent.
- The cost is usually far lower than people assume — get the number right first, then price it.
How the type of policy affects the amount you can afford
Sizing is only half the equation; the other half is keeping the policy in force. This is where the choice between term and permanent coverage matters. Term life provides the most death benefit per dollar, which is why families protecting a temporary window — the years of raising children and paying a mortgage — often start there. A large 20‑ or 30‑year term policy can cover the big DIME number at a premium most budgets can sustain.
Permanent coverage such as whole life costs more per dollar of benefit but never expires and can build cash value. Many families use a blend: a large term policy for the working years, plus a smaller permanent policy for lifelong needs like final expenses or a legacy. There’s no single right answer — it depends on how long you need coverage and your budget. Our data-driven term vs. whole life comparison breaks down the tradeoffs.
A quick checklist before you get a quote
- List your responsibilities — income years, mortgage, debts, education, final expenses.
- Tally your resources — existing coverage (including group), savings for your family.
- Run the gap — use the needs calculator for a personalized range.
- Decide your window — how many years does your family truly depend on this income?
- Talk it through — an independent advisor can shape the number around your budget and compare available options.
Want a number tailored to your family?
Use our free needs calculator for an estimate, then talk it through with a local advisor — no pressure, no cost.
Frequently asked questions
Is 10× income really enough? For many families, 10–15× income plus the mortgage is a solid target, but it can be too little for households with large debts, several young children, or big future goals — and too much for those with substantial savings and no dependents. The DIME method personalizes it.
Should I count my employer’s group coverage? Yes, count it as a resource — but remember it’s often limited (frequently 1–2× salary) and usually ends if you leave the job. Many families use a personal policy to fill the gap and keep coverage that travels with them.
Does coverage need to last forever? Not usually. If your main goal is protecting the working and mortgage years, term coverage matched to that window is often the most cost‑effective choice. Lifelong goals — final expenses, a legacy — are where permanent coverage fits.
Big Sioux Life is an independent life‑insurance agency serving Sioux Falls and South Dakota. This article is general education, not a quote, recommendation, or offer of insurance. Availability, features, and pricing vary by carrier and state and are subject to underwriting.