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Life Insurance Coverage Calculator

Find out how much life insurance coverage your family would need.

How it is calculated

The tool adds four amounts and subtracts what you already have: need = D + I + M + E and coverage = max(0, need − existing). D is non-mortgage debt, I is the total income to replace, M is the mortgage balance and E is future education cost, all in currency amounts. Note that I is a single total you enter yourself: the tool does not multiply anything, so work out annual income × years of support first. Existing coverage is optional and counts as 0 if left blank. The result never goes below zero, so if your assets and policies exceed the need, it shows $0.00. All four main fields must be filled and none may be negative.

Worked example

A family has 18,000 in car and credit-card debt, wants 8 years of a 60,000 salary replaced (60,000 × 8 = 480,000), owes 210,000 on the mortgage, expects 90,000 of education costs and already holds 100,000 in cover. Total need = 18,000 + 480,000 + 210,000 + 90,000 = $798,000.00. Recommended extra coverage = 798,000 − 100,000 = $698,000.00. The income part, $480,000.00, is the largest share of the need.

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Common mistakes

  • Typing the annual salary in the income field. The tool takes the total to replace, so you must multiply by the number of years first, otherwise the need is far too low.
  • Including the mortgage in the debt field as well. The mortgage has its own field, and counting it twice inflates the total.
  • Leaving out the existing coverage you already have, such as employer cover or savings you would count on. The recommended amount is then too high.
  • Treating the result as a quote or advice. It is a rule-of-thumb starting figure that ignores inflation, taxes, investment returns and a partner's income.

About this calculator

The DIME method is a widely used rule of thumb for estimating how much term life insurance coverage a family actually needs. Its name is an acronym for the four costs it adds together: Debt (everything owed besides the mortgage, like credit cards, car loans, and student loans), Income replacement (the total amount your family would need to replace your income — you enter this as one figure, typically your annual income multiplied by the number of years your family would need support), Mortgage (the remaining balance on your home loan), and Education (the estimated cost of your children's future schooling).

Those four figures are summed and then any existing coverage — savings, investments, or life insurance you already hold — is subtracted, leaving the additional coverage gap you would need to close to fully protect your dependents.

Financial planners, insurance agents, and individuals shopping for term life insurance use the DIME method as a starting benchmark before buying a policy, since generic advice like 'buy 10x your income' ignores your specific debts, dependents, and financial obligations.

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