How to use this calculator
- Annual income to replace and for how many years. Use your yearly pay, or the amount your family would need each year without it.
- Debts other than the mortgage. Car loans, credit cards, student loans and personal loans you’d want paid off.
- Mortgage balance. Enough to pay off the home, so your family can stay. Use $0 if you rent.
- Children and education fund per child. What you’d want set aside for each child’s college or training.
- Final expenses. Funeral or cremation, burial, final medical bills and estate costs.
- What your family already has. Existing life insurance (including through work) and savings or investments your family could use.
The results show coverage still needed, how each part of DIME contributes, what share of the total your existing resources cover, and how the answer changes if you replace more or fewer years of income. The calculator estimates a coverage amount only; it doesn’t quote premiums.
The DIME method
- Debt: every debt except the mortgage
- Income: annual income times the years your family would need it
- Mortgage: the remaining balance on your home loan
- Education: the total you’d want set aside for your children
If what you already have exceeds the total, the coverage needed is $0.
Worked example
A parent of two earns $80,000 and wants to replace 10 years of income. They owe $15,000 on a car and cards and $250,000 on the mortgage, want $50,000 set aside for each child’s education, and estimate $15,000 for final expenses.
| Need | Amount |
|---|---|
| Debts | $15,000 |
| Income: 10 × $80,000 | $800,000 |
| Mortgage | $250,000 |
| Education: 2 × $50,000 | $100,000 |
| Final expenses | $15,000 |
| Total needs | $1,180,000 |
| Life insurance through work | −$80,000 |
| Savings and investments | −$40,000 |
| Coverage still needed | $1,060,000 |
That’s about 13.3 times income. Adding the $80,000 they already carry, total coverage would be $1,140,000, inside the 10–15× rule-of-thumb range of $800,000 to $1,200,000.
A second example: a single parent who rents, earning $50,000, wants to replace 15 years of income, owes $8,000, wants $60,000 for one child’s education, and allows $12,000 for final expenses. With $50,000 of coverage through work and $10,000 saved, DIME gives $770,000 of coverage needed. That’s above 15 times income because 15 years of income replacement makes up 90% of the total.
Years of income replaced
The income part is usually the largest piece, so the number of years matters most. For the first example:
| Income replaced for | Income portion | Total needs | Coverage needed |
|---|---|---|---|
| 5 years | $400,000 | $780,000 | $660,000 |
| 10 years | $800,000 | $1,180,000 | $1,060,000 |
| 15 years | $1,200,000 | $1,580,000 | $1,460,000 |
| 20 years | $1,600,000 | $1,980,000 | $1,860,000 |
| 25 years | $2,000,000 | $2,380,000 | $2,260,000 |
Common anchors are the years until your youngest child finishes school or until your spouse would retire. If your spouse works, you may only need to replace part of your income.
The income-multiple rule of thumb
A quick shortcut is to buy a multiple of your income. The calculator shows a 10–15× income range, labeled as a rule of thumb. The National Association of Insurance Commissioners notes that some experts suggest five to eight times income, and recommends working through your family’s actual needs instead.
| Annual income | 5–8× | 10–15× |
|---|---|---|
| $40,000 | $200,000 – $320,000 | $400,000 – $600,000 |
| $60,000 | $300,000 – $480,000 | $600,000 – $900,000 |
| $80,000 | $400,000 – $640,000 | $800,000 – $1,200,000 |
| $100,000 | $500,000 – $800,000 | $1,000,000 – $1,500,000 |
| $150,000 | $750,000 – $1,200,000 | $1,500,000 – $2,250,000 |
The spread shows why a single multiple can mislead. Someone with a large mortgage and young children may need more than 15 times income; someone with no debts and grown children may need far less.
What else to consider
- Social Security survivors benefits. If you’ve worked enough, your children under 18 and a spouse caring for a child under 16 may receive monthly survivors benefits, and Social Security pays a one-time $255 lump-sum death payment to an eligible spouse or child. These can reduce how much income insurance needs to replace. The Social Security calculator estimates your benefit.
- Inflation and investment returns. DIME doesn’t adjust for either. A lump sum invested by your family would earn something, while costs would rise. Treating the two as roughly offsetting keeps the estimate simple.
- A stay-at-home parent’s work has value. Childcare and household costs would rise if they died, so they often need coverage even without a paycheck. Enter the annual cost of replacing that work as income.
- Term length. Match the policy term to your longest need, such as the years left on the mortgage or until the youngest child is grown. The mortgage payoff calculator shows when your home loan ends.
- Review it. Revisit the number after a birth, a home purchase, a large raise or paying off debt. Your net worth and retirement savings grow over time and reduce how much insurance you need.
Assumptions & limitations
DIME is a planning shortcut. It treats each need as a lump sum today, with no inflation, investment growth or taxes, and it counts all savings you enter as available to your family. It doesn’t consider Social Security survivors benefits, a working spouse’s income or your health. Premiums depend on your age, health, the policy type and the insurer, so get quotes from licensed agents or insurers before you buy.
Sources
- NAIC: Life insurance (consumer guide)
- SSA: Lump-sum death payment
- SSA: Survivors Benefits (publication 05-10084)
- IRS: Life insurance & disability insurance proceeds
This estimate is for planning only. It isn’t insurance, tax or financial advice, and it doesn’t quote premiums.
Frequently asked questions
How much life insurance do I need?
Enough to cover what your family would need without your income, minus what they'd already have. The DIME method adds your debts, several years of income, your mortgage balance and education costs, plus final expenses, then subtracts existing coverage and savings. For the example on this page, that comes to $1,060,000.
What is the DIME method?
DIME stands for Debt, Income, Mortgage and Education. You add non-mortgage debts, your annual income times the number of years your family would need it, your mortgage balance and the cost of your children's education. Most versions also add final expenses such as funeral costs.
Is 10 times my income enough life insurance?
It's a rough starting point. Rules of thumb vary widely. A common one is 10 to 15 times income, while the National Association of Insurance Commissioners notes that some experts suggest five to eight times. A needs-based method like DIME is more accurate because it uses your actual debts, mortgage and goals.
How many years of income should I replace?
A common choice is the number of years until your youngest child is financially independent, or until your spouse would reach retirement. Ten years of an $80,000 income adds $800,000 to the total; each extra year adds another $80,000. The table in the results shows the effect.
Should I count life insurance through work?
You can, but group coverage through an employer usually ends or has to be converted when you leave the job. Many people count it only as a supplement and buy individual term coverage for the core amount they need.
Is a life insurance payout taxable?
Generally no. The IRS says life insurance proceeds paid to a beneficiary because of the insured person's death aren't included in gross income. Any interest paid on the proceeds is taxable, and estates can raise separate tax questions.
Updated November 2026. Results are estimates for educational purposes and depend on the inputs you provide.