The most common advice you'll hear is "buy 10–15 times your annual income in life insurance." It's a decent starting point, but it ignores the specifics that actually matter: how much you owe, how many kids you have, what your spouse earns, and what you've already saved. A single 32-year-old making $120K with no mortgage and $200K in savings needs very different coverage than a 32-year-old making $80K with a $400K mortgage, two kids, and $30K in savings.
The method below — called DIME — gives you a personalized number based on your actual financial picture.
The DIME Method Explained
DIME stands for Debt, Income, Mortgage, and Education — the four components of your coverage need:
All outstanding debts except your mortgage: car loans, student loans, credit cards, personal loans, medical debt. Your policy should pay these off so your family starts clean.
How many years does your family need your income? Multiply your annual take-home by the number of years (typically 5–10). This keeps the household running while your partner adjusts.
Your remaining mortgage balance. This ensures your family can stay in the home without worrying about monthly payments — the single biggest expense for most households.
Estimated cost of your children's education. For college, budget $25K–$50K per child for public university or $50K–$100K+ per child for private. Even partial coverage helps enormously.
The formula: (D + I + M + E) − Existing Assets = Your Coverage Number
Existing assets include savings, investments, employer-provided life insurance, and any other resources your family could use. Subtract those from the total to avoid over-insuring.
Calculate Your Number
Life Insurance Coverage Calculator
Fill in what applies to you. Leave anything that doesn't apply as $0.
What the Rules of Thumb Get Wrong
The "10× income" rule
This is the most common advice, and it's not terrible — but it ignores debt and family size. Someone earning $100K with no mortgage and no kids might need $300K. Someone earning $100K with a $350K mortgage and two toddlers might need $1.2M. Same income, wildly different coverage needs.
The "income replacement only" approach
Some calculators only ask about income. But if you die, your family doesn't just lose your income — they also inherit your debts. And they still need to fund education, even without your earning power. The DIME method captures all of it.
Forgetting to subtract existing resources
If you already have $100K in savings and $200K in employer-provided life insurance, you don't need to cover that $300K again. Over-insuring wastes money on premiums. The DIME subtraction step prevents this.
How to Match Coverage to a Policy
Once you have your number, you have three choices for how to structure it:
Option A: One policy. The simplest approach. Buy a single term life policy for your full coverage amount with a term length that matches your longest obligation (usually your mortgage). Easy to manage, slightly more expensive over the life of the policy.
Option B: The ladder. Split your coverage across 2–3 policies with staggered terms. For example, if you need $800K: buy a $300K 10-year, a $250K 20-year, and a $250K 30-year. Coverage steps down as obligations shrink. Saves 30–50% on total premiums. Full breakdown in our ladder strategy guide.
Option C: Start small, add later. If the premium for your full coverage amount feels too steep, buy what you can afford now and add a second policy later. A $300K policy today is infinitely better than a $0 policy while you save up for $800K. Just know that the second policy will be priced at your age when you buy it.