How Much Life Insurance Do I Really Need?
Use our expert formula to calculate exactly how much coverage you need to ensure your family's lifestyle is protected.
The DIME Formula
When calculating your life insurance needs, financial advisors often recommend the DIME formula. It stands for Debt, Income, Mortgage, and Education.
1. Debt and Final Expenses
Add up all your outstanding debts (credit cards, auto loans, personal loans) plus an estimated $10,000 to $15,000 for funeral and final expenses.
2. Income Replacement
Multiply your current annual income by the number of years your family would need support. A common rule of thumb is 10 to 15 times your income.
3. Mortgage
Calculate the remaining balance on your mortgage so your family won't have to worry about losing their home.
4. Education
Estimate the future cost of college or vocational training for your children. Currently, a four-year public university averages around $100,000 per child.
Putting It All Together
Add these four numbers together, and you'll have a solid estimate of the death benefit you need. Remember, it's always better to slightly overestimate than to leave your family underinsured.
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