How Much Life Insurance Do I Need? A Worked Example
A step-by-step worked example of the DIME method for estimating a life insurance coverage amount.
Rather than guessing at a round number, the DIME method builds a coverage estimate from four specific categories in your actual finances. Here's exactly how the math works, start to finish.
Worked example
| Category | Input | Amount |
|---|---|---|
| Debt | $15,000 non-mortgage debt + $15,000 final expenses | $30,000 |
| Income | $70,000/year × 10 years | $700,000 |
| Mortgage | Remaining balance | $250,000 |
| Education | 2 children × $50,000 each | $100,000 |
| Total need | Sum of the above | $1,080,000 |
| Minus savings & existing coverage | $30,000 + $50,000 | −$80,000 |
| Additional coverage needed | $1,000,000 |
That $1,000,000 works out to about 14.3× this household's annual income — higher than the commonly cited "10-15x income" rule of thumb would suggest on the low end, largely because of the sizeable remaining mortgage and two children's education costs factored in directly.
Try your own numbers
Every input in this example — years of income, debt, mortgage balance, number of children, existing savings — is editable in the Life Insurance Needs Calculator, so you can see exactly how changing any one factor shifts the final estimate.