Guides
The DIME method for sizing life insurance
DIME adds debt, years of income, the mortgage and education costs to estimate coverage. How to run it, a worked example, and what it leaves out.
The DIME method estimates how much life insurance you need by adding four numbers: your Debts and final expenses, your Income multiplied by the years your family would need it, your Mortgage balance, and the Education costs you want covered. It takes about 10 minutes and fits a family far better than a flat salary multiple. Its weakness is that it usually overstates the need, because it uses gross income and ignores savings, existing coverage and Social Security, so treat the result as a starting point and adjust it.
The four parts of DIME
D: debt and final expenses
Add every debt except the mortgage: credit cards, car loans, personal loans, private student loans, medical bills. Then add final expenses such as the funeral, burial or cremation, and the cost of settling the estate.
Your family generally doesn't inherit your debts, but your estate pays them before anything passes to heirs, and anyone who co-signed or holds a joint account stays on the hook. Covering debts keeps those bills from eating into what your survivors receive. Federal student loans are discharged at death, so leave them out. Our guide to what happens to your debt when you die explains which debts survive you and which don't.
I: income
Multiply your annual income by the number of years your family would depend on it. Most people count until the youngest child turns 18 or finishes college. The classic version uses gross income, which is where most of DIME's overstatement comes from (more on that below).
M: mortgage
Use the current payoff balance, not the original loan amount. Including it means the death benefit can clear the house so your family never has to move or refinance on one income. Renters can skip this line, since rent is already a living cost covered by the income line.
E: education
Pick a target per child. For scale, the College Board reports that average published tuition and fees for 2025–26 were $11,950 a year at in-state public four-year colleges, $31,880 for out-of-state students and $45,000 at private nonprofit colleges, before housing and food. Many parents aim to cover a share rather than the full sticker price, especially since tuition will rise before younger children enroll.
A worked example (hypothetical)
Say Marcus is 34, earns $70,000 and has two children, ages 1 and 3. He owes $240,000 on his mortgage, $14,000 on a car and $4,000 on credit cards, and figures $12,000 for final expenses. He wants to cover income until his youngest turns 18 (17 years) and set aside $40,000 per child for college.
| DIME line | Calculation | Amount |
|---|---|---|
| Debt and final expenses | $14,000 + $4,000 + $12,000 | $30,000 |
| Income | $70,000 × 17 years | $1,190,000 |
| Mortgage | Payoff balance | $240,000 |
| Education | $40,000 × 2 children | $80,000 |
| DIME total | $1,540,000 | |
| Minus existing coverage | Group life, 1× salary | −$70,000 |
| Minus savings | Emergency fund and brokerage | −$20,000 |
| Coverage to buy | $1,450,000 |
The textbook DIME formula stops at the total. Subtracting coverage and savings you already have is a standard adjustment most planners make, and it is the first step toward a full needs analysis, which our main sizing guide walks through.
Where DIME overshoots
It uses gross pay. If Marcus dies, his family loses his take-home pay, not his salary. Income taxes, his retirement contributions and what he spends on himself (lunches, commuting, his car, his share of groceries) disappear along with the paycheck. A household that really runs on $50,000 of his income doesn't need $70,000 a year replaced.
It assumes the money earns nothing. A lump sum invested even conservatively earns some return while it is being spent down. The income replacement: the 10x rule and better ways guide shows how much that changes the figure.
It ignores Social Security. Unmarried children under 18 (19 if still in high school) can receive up to 75% of a deceased parent's basic benefit, subject to a family maximum, according to the Social Security Administration. For a young family that can be worth hundreds of thousands of dollars over the years. See Social Security survivor benefits and the $255 death payment.
The mortgage and income lines overlap. The income line already includes the mortgage payment. If you pay the house off with the M line, the family's ongoing costs drop by that payment.
Where DIME undershoots
Stay-at-home parents. With no income line, DIME suggests a stay-at-home parent needs only enough for debts, the mortgage and college. In reality the surviving parent may face years of childcare and household costs. That calculation is covered in life insurance for stay-at-home parents.
Things the acronym skips. Childcare a surviving spouse would now pay for, an emergency fund, support for an aging parent, a child with lifelong needs, and the retirement savings the deceased would have added for the surviving spouse.
Inflation. A level death benefit fixed today buys less in 15 years, and tuition will almost certainly be higher by the time a toddler enrolls.
A refined DIME (same hypothetical family)
Here is Marcus's example rerun with three adjustments: income at the $50,000 a year his family actually relies on (with the mortgage payment removed, since the M line pays the house off), the same offsets, and Social Security benefits for his children estimated, for illustration, at $1,500 a month combined for 15 years.
| Line | Classic DIME | Refined DIME |
|---|---|---|
| Debt and final expenses | $30,000 | $30,000 |
| Income | $1,190,000 | $850,000 |
| Mortgage | $240,000 | $240,000 |
| Education | $80,000 | $80,000 |
| Existing coverage and savings | −$90,000 | −$90,000 |
| Social Security for the children | not counted | −$270,000 |
| Coverage to buy | $1,450,000 | $840,000 |
The right answer for most families sits somewhere in that range, depending on how conservatively you want to plan. If you'd rather leave a margin for inflation and surprises, lean toward the classic figure; if premiums are tight, the refined figure is still defensible.
Turning a DIME number into a policy
- Term length. The "I" years tell you how long the need lasts. Choose a level term at least that long, and check that it outlasts the mortgage. The How long a term do I need? runs both.
- Layering. The D and M lines shrink every year and the E line ends when the youngest finishes school. Two policies with different terms can track that decline; the term life ladder builder compares the cost of a ladder with one large policy.
- Do the math once more. The How much life insurance do I need? lets you swap in net income, Social Security and an assumed return to see how far your DIME figure moves.
For how DIME compares with the economist's approach, see human life value: the economist's way to size coverage.
Key takeaways
- DIME adds debts and final expenses, years of income, the mortgage payoff and education costs.
- It beats a flat salary multiple but usually overstates the need because it uses gross income and ignores savings, coverage and Social Security.
- It understates the need of a stay-at-home parent, whose loss shows up as new costs rather than lost pay.
- Subtract existing coverage and savings, and consider using take-home income, to turn DIME into a fuller needs analysis.
- Match the term length to the income years and the mortgage, and consider laddering as debts shrink.