How Much Life Insurance Do I Need? (DIME Method + Examples)
Most online quizzes throw out a number like "10× your salary" and call it done. That works for some people and badly underestimates everyone with kids or a mortgage. The DIME method — Debt, Income, Mortgage, Education — gives you a coverage number tied to your actual obligations, not a generic multiplier.
Use the calculator
Life Insurance Needs Calculator
Step-by-step
- 1
Add up your non-mortgage debt (D)
Credit cards, car loans, student loans, personal loans, medical debt. The goal is for your family to clear these without selling assets. If you have $18,000 in cards and a $22,000 car loan, that is $40,000 of D.
- 2
Multiply your income by years of replacement (I)
How many years of your salary should the policy replace? Typical answers: until your youngest child turns 18, or until your spouse reaches retirement. A 35-year-old earning $80,000 with a 5-year-old usually picks 13 years × $80,000 = $1.04M for I.
- 3
Add the mortgage payoff (M)
The current loan balance, not the original amount and not the home value. If you owe $310,000, M = $310,000. This lets your family stay in the house without scrambling for a refi.
- 4
Add education costs per child (E)
In-state public 4-year is roughly $108,000 in 2026 (tuition, fees, room, and board). Private averages closer to $230,000. Pick the school type you actually expect, not the cheapest, and multiply by number of kids.
- 5
Subtract what you already have
Existing employer life insurance, savings, taxable investments, and your spouse's income capacity. If your DIME total is $1.6M and you have $200,000 saved + $150,000 in employer coverage, you need $1.25M in new coverage.
- 6
Round up, do not round down
Coverage is priced in tiers ($500K, $750K, $1M, $1.5M, $2M). Going from $1.25M to $1.5M usually adds $4–$8/month for healthy applicants under 45. The buffer matters more than the savings.
- 7
Buy term, not whole, unless you have a specific reason
For 95% of households, a 20- or 30-year level term policy at 10–15× the price you would pay for whole life is the right answer. Use the calculator on this site to see the cost gap over 20 years.
💡 Tips
- If your spouse stays home, do not put their coverage at zero. Replacing childcare, household management, and lost income capacity typically requires $250,000–$500,000.
- Buy in your 30s if you can. Premiums roughly double every decade for the same coverage and same health rating.
- Get the medical exam version, not no-exam. No-exam policies are 30–80% more expensive for healthy people.
- Lock the policy length to your need date — the year your youngest finishes college or your mortgage pays off, whichever is later.
FAQ
Is 10× my salary a good rule of thumb?
10× works as a fast sanity check but consistently underestimates parents and homeowners. A $90,000 earner with two kids and a mortgage usually needs $1.5–$2M, which is closer to 17–22×. Use DIME for the real number.
Do stay-at-home parents need life insurance?
Yes, usually $250,000–$500,000 of term coverage. Replacing childcare alone runs $20,000–$30,000 per year per child in most US metros. Add household management and the loss of future earning capacity and the number rises fast.
Should I count my employer-provided life insurance?
Yes, but discount it. It usually disappears the day you change jobs, and the typical 1× or 2× salary employer policy is well below DIME for anyone with a family. Treat it as a supplement, not a foundation.
What term length should I pick — 20 or 30 years?
Pick the longer of: years until your youngest is 22, or years until your mortgage is paid. A 32-year-old with a 2-year-old and a 30-year mortgage almost always picks 30-year term.
Is term life cheaper if I quit smoking?
Dramatically. Smokers pay 2.5–3.5× the rate of non-smokers for the same coverage. Most carriers reclassify you after 12 months smoke-free. Apply, then re-shop after a year off cigarettes.
Can I get life insurance with high blood pressure or diabetes?
Almost always yes, with controlled conditions. Type 2 diabetes managed with diet or metformin and an A1C under 7 typically rates Standard or Standard Plus. Use a broker who shops 10+ carriers — rates vary 60% across companies for the same applicant.