How Much Life Insurance Do I Need? The DIME Method (2026)

How much life insurance you need is a sum of four subtractions, not a feeling and not a folklore multiplier. The DIME method — Debt, Income, Mortgage, Education — adds everything a death would force your family to pay or replace, then subtracts everything that already exists to cover it. Ten minutes of arithmetic produces a number you can defend, shop for, and stop worrying about. The multipliers that circulate ("ten times your salary") are approximations of this same sum, and they are wrong in both directions for anyone whose finances are not average.

The Four DIME Inputs

Each letter answers one question the surviving household will face in the first month, the first year, and every year after. Being precise here is what separates a policy that carries a family from one that merely impresses at the funeral.

• Debt: every obligation that would not die with you — car loans, credit cards, personal loans, and any debts a co-signer inherits
• Income: the years of your take-home pay the household actually depends on, not your gross salary
• Mortgage: the payoff that keeps the family housed — or the rent bridge if you do not own
• Education: realistic future costs for each child, priced at today's public-college rates as a floor

                Debt:     car loan 14,000 + cards 6,000            20,000
Income:   70,000 take-home x 15 years              1,050,000
          (declining-need: see laddering below)
Mortgage: payoff balance                           260,000
Education: 2 children x 100,000                    200,000
Total need                                       1,530,000
Minus liquid assets: savings 30,000               -30,000
Minus spouse's income share already counted       (n/a)
Minus existing group life (1x salary)             -70,000
Minus Social Security survivors, est. 10 yrs     -180,000
Recommended coverage                           ~1,250,000
              

Two adjustments in that example deserve emphasis. Group life through work looks generous on the benefits page and disappears with the job — count it at its portable value, which is usually one times salary. And Social Security survivor benefits are real money: the Social Security Administration pays a surviving parent with young children a monthly benefit that can reach the low five figures annually, which is why subtracting an estimate for the years children are minors is honest arithmetic rather than optimism.

Refining the Income Line

Fifteen flat years of income replacement is deliberately conservative and deliberately over-simple. The need is not level: it is heaviest while children are young and steps down as each becomes independent and as retirement savings compound. Two refinements cover this without over-engineering.

What to Subtract — and What Not To

Subtractions are where needs calculations go wrong in both directions. Subtract only assets that would be immediately and painlessly available: emergency funds, taxable investments, existing portable life coverage. Do not subtract retirement accounts that the survivor will need for their own old age, home equity the family lives in, or the theoretical sale of anything whose sale would worsen the loss it is funding. The calculation protects a household, not a balance sheet.

1. List every debt a co-signer or the estate would carry, including any private student loans a spouse co-signed
2. Price income replacement on take-home pay, for the years dependents actually need it
3. Add the mortgage payoff or a rent-bridge fund
4. Add education at a defensible figure per child
5. Subtract liquid savings, portable group coverage, and an estimate of Social Security survivors' benefits for the minor years
6. Round up to the nearest coverage band and price it as level term

Stay-at-Home Parents: Price the Job

The most common underinsurance is the uninsured parent without a salary. A stay-at-home parent's work — childcare, logistics, household management — costs real money to replace, commonly $30,000 to $50,000 a year at market rates, and the surviving parent's income does not stretch to buying all of it back. The DIME arithmetic applies identically: replace the household services as income, insure the years until the youngest child is self-sufficient, and add education. The number that comes out is usually a surprise to the family that "had no income to insure."

From Number to Policy

The output of this exercise is a face amount and a dependency window — the two inputs every quote needs. Term pricing makes the resulting number affordable: the $1.25 million from the worked example, laddered over twenty and thirty years, prices in the tens of dollars monthly for a healthy applicant. Run the figures through the needs calculator, take them to multiple carriers, and treat any policy pitched to you before the arithmetic was done as a product in search of a problem.

For verification, the Social Security Administration publishes survivor-benefit amounts and eligibility, and your state insurance department regulates the carriers that will quote the number — both are free, primary sources worth two minutes each before you buy.