Life Insurance Needs Calculator (DIME Method)
Determine your ideal coverage using the industry-standard DIME method: Debt, Income, Mortgage, and Education.
Recommended Coverage Amount
How Much Life Insurance Do You Really Need?
Choosing a life insurance policy is one of the most critical financial decisions for anyone with dependents. While a common rule of thumb suggests buying 10 times your annual salary, this generic approach often overlooks specific financial obligations like mortgages and rising education costs.
The DIME Method Explained
The DIME method is a comprehensive way to ensure your family maintains their standard of living. It stands for:
- Debt: Sum up all non-mortgage debts including car loans and credit cards.
- Income: Calculate how many years your family will need your salary. Multiply your annual income by that number of years.
- Mortgage: Include the total payoff amount for your home to ensure your family can stay in their house.
- Education: Estimate the cost of sending your children to college or private school.
Example Calculation
Imagine a family where the primary earner makes $75,000. They have a $200,000 mortgage, $10,000 in car loans, and want to provide $100,000 for their child's education. If they want to replace their income for 10 years:
- Debt: $10,000
- Income ($75k x 10): $750,000
- Mortgage: $200,000
- Education: $100,000
- Final Expenses: $15,000
- Total Need: $1,075,000
If they already have a $100,000 policy through work, their "Gap" or actual need is $975,000.
Why Final Expenses Matter
Funerals, memorial services, and estate settlement costs can easily exceed $15,000. Including this in your life insurance calculation ensures that your loved ones aren't hit with immediate out-of-pocket costs during a difficult emotional time.