What DIME covers
DIME is a quick way to make sure a policy would actually replace what you provide:
- Debt — non-mortgage balances (cards, car, personal loans) so your family isn’t left with them.
- Income — your annual income times the number of years your family would need it. Replacing 10 years is a common middle ground; until the youngest child is independent is another.
- Mortgage — enough to pay off the home so housing is secure.
- Education — a fund for your children’s schooling.
Then subtract what you already have — existing policies and liquid savings. What’s left is the gap. A simpler cross-check is the “10–12× income” rule; if the two land far apart, dig into why.
A worked example (the estimator's defaults): $20,000 debt + ($80,000 income × 10 years = $800,000) + $250,000 mortgage + $100,000 education = $1,170,000 of need. Subtract $100,000 of existing coverage and savings and the gap is $1,070,000 — round to a $1M–1.1M term policy. Change any input above and watch the number move.
One nuance DIME skips: it adds up raw dollars, but a lump sum your family invests also earns returns while they spend it down. If you'd rather not overshoot, the present-value approach — the amount that, invested conservatively, replaces the income stream — often lands a bit lower than DIME's straight multiplication. DIME errs on the safe side, which for most families is the right direction to err.
Two common mistakes
Leaning only on work coverage. Group life is usually one to two times salary and disappears when you change jobs — fine as a top-up, risky as your whole plan. Buying the wrong type. For income replacement and a mortgage, term insurance is usually the cheapest fit; permanent policies earn their place for lifelong needs. See types of life insurance to match the product to the job.
Frequently asked questions
- How much life insurance do I need?
- A common starting point is DIME: Debt + Income × years + Mortgage + Education, minus coverage and savings you already have. The “10–12× income” rule is a quick cross-check. Both are estimates.
- Does employer coverage count?
- You can subtract it, but cautiously — it’s usually limited and ends when you leave the job, so treat it as a supplement.
- Term or permanent for this need?
- Term is usually cheapest for income replacement and a mortgage; permanent is for lifelong needs. Many people combine both.
- Does DIME overestimate?
- It can, slightly, because it adds raw dollars without crediting the investment return a lump sum would earn while it's spent down. A present-value estimate often lands a bit lower. DIME deliberately errs on the safe side.
Educational only; not financial or insurance advice, and not a quote. This estimate uses simplified rules of thumb; your actual need depends on your full situation.