How Much Life Insurance Do I Need? The DIME Method
6 min read · Last reviewed August 18, 2026
"Buy ten times your salary" is easy to remember and easy to get wrong — it ignores whether you have a mortgage, how many children you have, or how much you have already saved. The DIME method is a more thorough alternative: add up four specific things your family would need, then subtract what you already have to cover them.
This guide walks through each of the four DIME components, works a full example, and covers the two questions people get stuck on: how many years of income to replace, and what to do about assets you already have.
D is for Debts
Start with everything except the mortgage: credit cards, car loans, personal loans, and any other balance your family would otherwise have to pay off from savings or a life insurance payout. Add a realistic estimate of final expenses — funeral costs and estate settlement — since these arrive immediately and are rarely budgeted for.
I is for Income
This is usually the largest component: your annual income multiplied by the number of years you want it replaced. There is no universally correct number of years. Some people choose until the youngest child is financially independent; others pick a fixed transition period, such as five or ten years, or a horizon tied to their own planned retirement.
Whatever you choose, be explicit about it. A ten-year horizon on a 75,000 income already adds 750,000 to the total — small changes in this single input move the recommended coverage more than any other component.
M is for Mortgage
Enter the current payoff balance, not the original loan amount. The goal is that your family is not forced to sell the home to clear the loan after losing your income.
E is for Education
A per-child estimate — however rough — multiplied by the number of children. If you have no strong view on future education costs, it is reasonable to leave this at zero and revisit it later; the calculator does not require an entry here.
Subtract what you already have
Add up your existing savings, investments and any life insurance already in place, and subtract that total from the sum of the four DIME components. What is left is the coverage gap — the amount a new or additional policy would need to close.
Worked example: 15,000 of other debts and 12,000 of final expenses (27,000), a 220,000 mortgage, 75,000 of income replaced for 10 years (750,000), and two children at 40,000 of education each (80,000) — a gross need of 1,077,000. With 50,000 already in savings and existing coverage, the recommended new coverage is 1,027,000.
What DIME does not do
It is a needs estimate, not a premium quote. What a policy of that size actually costs depends on your age, health and an insurer's underwriting — none of which any calculator can know in advance. It also does not account for inflation over the replacement period or for how your family's needs might change over time, so it is worth revisiting every few years or after a major life event.
Frequently asked questions
▶Is DIME better than the '10x salary' rule?
DIME is more thorough because it reflects your actual debts, mortgage, family size and existing assets rather than a single multiple applied to everyone. It takes a few more minutes to work through, and the result is more specific to your situation.
▶How many years of income should I replace?
There is no fixed answer. Common approaches include replacing income until the youngest child is independent, for a set transition period, or until your own planned retirement. Whichever you pick, the number of years matters more to the total than almost any other input.
▶Do I need to buy the exact DIME number?
No. It is a starting point for a conversation with a licensed agent, who can also account for factors this method does not, such as your health class and any group coverage you may already have through work.
Try the calculators
Estimate how much life insurance coverage your family would need using the DIME method — debts, income, mortgage and education.
Open calculator →Compare your own term and whole life quotes by projecting what the saved premium difference could grow to if invested.
Open calculator →Estimate the monthly disability insurance benefit you would need on top of existing income sources to cover essential expenses.
Open calculator →