Use the DIME method, debt, income, mortgage, and education, to estimate how much life insurance coverage your family would actually need.
DIME is a widely used framework for estimating life insurance needs, standing for Debt, Income, Mortgage, and Education. Rather than picking a round number or a simple multiple of salary, DIME adds up the actual dollar obligations your family would face if your income disappeared: debts that would need to be paid off, years of lost income that would need replacing, the remaining mortgage balance, and future education costs for any children. Every slider on this page has a matching number field: drag to explore, or type exact figures if you already know your numbers.
Debt covers non mortgage obligations like credit cards, auto loans, and personal loans that would otherwise burden your survivors. Income is the biggest component for most families: multiply the annual income you want replaced by the number of years you want it replaced, commonly until children are grown or a spouse reaches retirement age. Mortgage is simply your remaining loan balance, since owning the home outright removes a major recurring expense. Education estimates the future cost of college or other schooling for each child, since that expense doesn't disappear along with the income that was going to fund it.
A common rule of thumb suggests coverage equal to ten times your income, but that ignores your actual specific obligations. A family with a paid off house and no debt needs far less coverage than a family with a large mortgage and young children, even at the identical income level. DIME produces a number tailored to your actual financial picture rather than a generic multiple.
This tool doesn't account for final expenses like funeral costs, ongoing childcare costs beyond education, inflation on future education and income figures, or the value of a stay at home parent's contributions if that parent were the one insured. Many financial professionals treat DIME as a solid starting estimate to refine with a full needs analysis, not a final answer.
Needs based life insurance analysis, including the DIME and human life value methods, is core content on the Life and Health insurance license exam and its state specific versions for California, New York, Texas, and Florida. Insurance needs analysis also appears in the risk management section of the CFP exam. Once you know how much coverage you need, our Buy Term and Invest the Difference Calculator can help you think through how to structure it.
Most planners use gross income as a starting point, since it represents your family's total earning capacity, though some prefer net take home pay since that's what actually funds household expenses. Either is defensible as long as you're consistent about what the replacement figure is meant to cover.
Liquid savings and investments are resources your family could draw on immediately without needing to be replaced by insurance, so counting them reduces how much new coverage is actually necessary. Illiquid assets like retirement accounts with early withdrawal penalties are sometimes excluded or only partially counted for this reason.
The DIME framework can still apply, though the Income component would typically be replaced by an estimate of the cost to replace that parent's unpaid contributions, such as childcare, rather than a salary, since a stay at home parent's economic value isn't reflected in a paycheck.
Yes. Each slider has a paired number input. Type directly into any gold field to enter a precise figure, and the slider along with all results update immediately.
Needs based insurance analysis shows up directly on Life and Health exams. Practice for free.
Browse Free Practice Exams →