How Much Life Insurance Do You Actually Need? Use the DIME Method

Here's a scenario. You have a $350,000 mortgage, two kids, $30,000 in car and credit card debt, and you earn $90,000 a year. You have 30 years until retirement. A "10 times salary" rule gives you $900,000. The DIME method gives you $3.4 million. That gap — $2.5 million of uncovered risk — is what happens when people use rules of thumb instead of math.

The DIME Method: Four Numbers That Actually Matter

• •D — Debt: Add up every non-mortgage liability. Credit cards, car loans, student loans, personal loans. Your family would need to pay these off.
• •I — Income: Annual salary × years until retirement. This is what your family loses if you're gone tomorrow.
• •M — Mortgage: The full remaining balance — so your family keeps the home.
• •E — Education: Estimated college cost per child. Four-year public college averages $120,000+ including room and board.

Add D + I + M + E, then subtract your existing savings, investments, and any current life insurance. The result is your coverage gap — the exact amount you need a policy to cover.

Calculate Your Life Insurance Need

Term vs Whole Life: The Honest Breakdown

For most families with kids and a mortgage, term life is the right answer. A $1,000,000 30-year term policy for a healthy 30-year-old costs roughly $40–$55/month. Whole life policies for the same coverage cost $800–$1,200/month and invest a portion in a low-return cash value account. The classic financial advice: buy term, invest the difference. For the vast majority of people, this wins.

When Your Coverage Need Drops

Life insurance need peaks when you have young children, a large mortgage, and years of income left to replace. It shrinks as: your kids become financially independent, your mortgage gets paid down, your investment portfolio grows, and you approach retirement. Many people find they can reduce or eliminate coverage in their 50s as their nest egg crosses into self-insured territory.