How Much Life Insurance Do I Need? The DIME Method

What DIME stands for

• D: non-mortgage Debt to pay off
• I: Income replacement for the family
• M: Mortgage payoff so the family keeps the home
• E: Education funding for children

Add the four together, then subtract what you already have. That is the coverage gap a policy needs to fill.

D and I: debt and income replacement

Pay off non-mortgage debt (credit cards, car loans, student loans) so the family is not carrying payments without the earner. For income, a common rule is 10 years of the earner's income, so a 60,000 dollar earner adds 600,000 dollars to replace paychecks while the family adjusts.

M and E: mortgage and education

Pay off the mortgage in full so the family keeps the home mortgage-free. For education, estimate the expected cost per child (public in-state, private, or a set dollar target) and multiply by the number of kids.

Subtract what you already have

Existing life insurance (including employer group coverage), savings, and investments all reduce the gap. Only the shortfall needs to be filled with new coverage.

Worked example

A household with 20,000 in debt, 60,000 income times 10 years = 600,000, a 250,000 mortgage, and 2 kids times 100,000 education = 200,000 has a gross need of 1,070,000. Subtract 200,000 of existing coverage and the gap is 870,000.