Signaling dynamics are crucial in biological systems, and biosensor-based real-time imaging has revolutionized their analysis. Fluorescence lifetime imaging microscopy (FLIM) excels over the widely used fluorescence intensity imaging by allowing the measurement of absolute signal levels, independent of sensor concentration. This capability enables the comparison of signaling dynamics across different animals, body regions, and timeframes. However, the advantage of FLIM can be compromised by factors like autofluorescence in biological experiments. To address this, we introduce FLiSimBA, a flexible computational framework for realistic Fluorescence Lifetime Simulation for Biological Applications. Through simulations, we analyze the signal-to-noise ratios of fluorescence lifetime data, determining measurement uncertainty and providing necessary error bars for lifetime measurements. Furthermore, we challenge the belief that fluorescence lifetime is unaffected by sensor expression and establish quantitative limits to this insensitivity in biological applications. Additionally, we propose innovations, notably multiplexed dynamic imaging that combines fluorescence intensity and lifetime measurements. This innovation can transform the number of signals that can be simultaneously monitored, thereby enabling a systems approach in studying signaling dynamics. Thus, by incorporating diverse factors into our simulation framework, we uncover surprises, identify limitations, and propose advancements for fluorescence lifetime imaging in biology. This quantitative framework supports rigorous experimental design, facilitates accurate data interpretation, and paves the way for technological advancements in fluorescence lifetime imaging.