The DIME method: calculate your life insurance needs
Key takeaways
04 · ideas- D = all non-mortgage debt to pay off
- I = income × years until youngest child is independent
- M = mortgage remaining balance
- E = estimated education costs per child
Basic level
The essentials · 1 min
DIME stands for: Debt + Income replacement + Mortgage + Education
Add these four numbers to get your minimum life insurance coverage.
Example for a 35-year-old:- D — Other debts: $40,000 (car, credit cards)
- I — $75,000 income × 20 years: $1,500,000
- M — Mortgage remaining: $280,000
- E — 2 kids × $60,000 education: $120,000
- Total: $1,940,000
The old "10x salary" rule would suggest $750,000 — less than half. The DIME result better reflects actual financial obligations.
Intermediate level
How it applies · 2 min
DIME vs. 10x rule comparison
| Situation | 10x Rule | DIME | Difference |
|---|---|---|---|
| No mortgage, no kids | $600,000 | $350,000 | DIME is lower |
| Large mortgage + 2 kids | $800,000 | $1,800,000 | DIME is higher |
| Self-employed, variable income | $700,000 | $1,400,000 | DIME is higher |
| Stay-at-home parent (no income) | $0 | $600,000 | DIME captures childcare |
The stay-at-home parent case: DIME for the income component uses the cost of replacing services — childcare, household management, etc. — not just salary. A stay-at-home parent may need $500,000–$800,000 in coverage even with no earned income.
The income multiplier question: DIME typically uses years until youngest child is independent (18–22 years). A full needs analysis uses the present value of income over that period, which is slightly lower than simple multiplication because future dollars are discounted.
Advanced level
The math, step by step · 1 min
Full needs analysis: the most accurate method
The needs analysis replaces DIME's simple income multiplication with a present value calculation:
Where I is annual income to replace, r is expected investment return, n is years.
At $75,000 income, 7% return, 20-year horizon:
vs. DIME's simple $75,000 × 20 = $1,500,000
The present value method gives a lower (and arguably more accurate) number because it assumes your beneficiaries will invest the payout and live off returns, rather than spending the principal linearly.
Which to use: For a first estimate, DIME is fine — it's conservative (slightly over-insures). For precision and minimizing premiums, use the present value method. Either way, get quotes from 3+ insurers before buying.