How Much Life Insurance? One Easy Way to Estimate

In order to determine how much life insurance you’ll need before buying it, it helps to estimate how much your family will need if you passed away unexpectedly.

There are a variety of ways one can calculate how much life insurance coverage an individual needs. The DIME Method is a simple way to determine how much life insurance coverage is necessary for you.

It is sometimes referred to as a “life insurance calculator,” which provides an advisor or client with an excellent starting point when determining insurance coverage needs.

It’s very straightforward. Here we go:


The “D” in DIME stands for our debt. Any outstanding debts other than a mortgage, such as credit cards, vehicle loans, line of credit, student loans, plus your future funeral expenses.

Income replacement

The “I” in DIME stands for the income our spouse or dependents will lose if we were to pass away tomorrow.

Most insurance agents suggest multiplying your annual income by 10 to calculate lost income. Some families would require financial support for longer than 10 years.

Selecting this number allows you to customize coverage based on your family’s specific needs.


The “M” in DIME stands for our outstanding mortgage. How much money would be required to pay off the remainder of our mortgage should we pass away?

Education or end-of-life planning

The “E” in DIME stands for education funding for our kids or, if you prefer, any final expenses for your end-of-life plans. This all depends on whether a person wants to leave behind an estate, educational funds for their kids, or both.

Keep in mind, college doesn’t just mean tuition. Do not forget to include the cost of books, housing, and meal plans.

One recommendation is to be sure to write a will and establish end-of-life documents. Upon your death, the terms of your will determine who will receive any assets not otherwise designated by titling, terms of a trust, or beneficiary designations, such as on retirement accounts or insurance policies.

Lastly, you want to periodically review and update your estate plan often as life-changing events occur, such as marriage, the birth of new children, or divorce.