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Life Insurance Calculator

Updated · By the CalculatorDash editorial team · How we check our maths

Quick answer

The DIME method adds up Debt, Income to replace, Mortgage and Education, then subtracts savings and existing cover. Someone with $20,000 of debts, a $75,000 income to replace for 10 years, a $250,000 mortgage and $100,000 for children's education, who has $50,000 saved and $100,000 of cover through work, needs about $970,000 more.

Life insurance needed

$
$
years
$
$
$
$

Additional cover needed

$970,000

Total family need (DIME)
$1,120,000
As a multiple of income
12.9

A rough guide. A licensed adviser can account for taxes, pensions, Social Security survivor benefits and your family's plans.

How this calculator works

Life insurance replaces the money your family would lose if you died. The DIME method is a simple, widely used way to size cover: add Debts, Income for the years your family needs it, the Mortgage balance and Education costs, then subtract savings and any cover you already have, such as a policy through work.

For most families with dependants, level term life insurance covering the years until the children are independent and the mortgage is paid gives the most cover per dollar. Permanent policies cost much more for the same amount.

The formula

Need
debts + income × years + mortgage + education
Additional cover
need − savings − existing cover

Worked example

$20,000 of debts + $75,000 × 10 years of income + a $250,000 mortgage + $100,000 for education is $1,120,000. Subtract $50,000 of savings and $100,000 of workplace cover and the family needs about $970,000 more, roughly 12.9 times income.

Tips

  1. 01Workplace cover usually ends when you leave the job; don't rely on it alone.
  2. 02Choose a term that lasts until your youngest child is independent.
  3. 03Stay-at-home parents need cover too: replacing childcare and household work is expensive.

Frequently asked questions

How much life insurance do I need?

A quick rule of thumb is 10–12 times your income, but the DIME method above gives a more tailored number.

Term or whole life insurance?

Term insurance is far cheaper and suits most people who need cover while children are young and debts are high. Whole life adds lifelong cover and a savings element at a much higher cost.

Should I count my 401(k) or retirement savings?

Many people do count liquid savings and investments, but some leave retirement accounts out so a surviving partner's retirement isn't depleted.

Does life insurance pay out tax-free?

In the US, death benefits are generally not subject to income tax. Rules differ in other countries.