Calculating Your Life Insurance Need
The DIME method, Debt, Income, Mortgage, Education, is the classic worksheet for sizing coverage. Here is how to run it, where it falls short, and what the full needs analysis adds.
DIME adds debts, 10 years of income, mortgage balance, and education costs for a quick coverage estimate. The fuller needs analysis adjusts the income years to your real timeline and subtracts assets and existing coverage. Both are educational tools; confirm big decisions with a licensed professional.
Running the DIME method
D: total non-mortgage debts. I: annual income x 10. M: remaining mortgage balance. E: projected education costs per child. Add all four for the DIME estimate. Example: $40,000 debts + $1,000,000 income + $280,000 mortgage + $200,000 education = $1,520,000.
DIME is fast and memorable, which is why advisors teach it. It works best as a floor: if your current coverage is far below the DIME number, you are almost certainly underinsured. But take its income multiplier as a starting point, not a law.
Where DIME falls short
Ten years of income is arbitrary: a family with a newborn needs more years than a family with teenagers. DIME ignores assets that already cover part of the need, ignores existing coverage, and ignores a spouse's income that continues. It can overshoot for wealthy families and undershoot for young ones.
It also treats the mortgage separately from debts, which double counts if you already included housing in income replacement. Pick one approach per expense: either the income multiplier covers housing, or the mortgage gets its own line, not both. Consistency matters more than which you choose.
The full needs analysis
Start from DIME, then fix its gaps: set income years to your real dependency timeline (often 15 to 20 with young kids), subtract savings, investments, and existing life insurance, and add any special needs like a lifelong dependent's care costs.
The calculator on this site runs exactly this method. Revisit it yearly and after big events; the number should glide downward as kids grow, debts shrink, and savings compound. When the need approaches zero, you have self-insured, which is the goal the whole exercise serves.
Skip the arithmetic
Run the full needs analysis with the free life insurance calculator.
Needs analysis questions
What is the DIME method?
Each letter is a lump sum your family would need if you died tomorrow. It is quick, conservative on income years, and blind to assets. Use it as a floor and refine with the full needs analysis on this site's calculator.
How often should I redo my life insurance calculation?
The inputs move constantly while premiums only rise with age. An annual ten-minute check keeps coverage matched to the need without overpaying. Set a calendar reminder alongside your other yearly money reviews.