# How much life insurance do I need?

Estimates how much life insurance coverage you need by the DIME method (debt, income, mortgage, education), minus the coverage and savings you already have.

- Page: https://www.acalculator.org/finance/life-insurance-calculator
- JSON spec: https://www.acalculator.org/finance/life-insurance-calculator.json
- Version: 8a7fa4a2f46d

## Default answer

Example with the default inputs (Yearly income to replace $70,000.00, Years of income 10, Debts and final expenses $25,000.00, Mortgage balance $240,000.00, Children to put through school 2, Education cost per child $80,000.00, Life insurance you have $0.00, Savings your family could use $0.00): By the DIME method you need about $1,125,000.00 of life insurance: a DIME total of $1,125,000.00 minus $0.00 you already have.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| income | Yearly income to replace | The income your family would lose each year, before tax. |
| years | Years of income | How many years of income the coverage should replace, for example until your youngest child is grown. |
| debts | Debts and final expenses | Debts other than the mortgage (car loans, credit cards, student loans) plus funeral and other final costs. |
| mortgage | Mortgage balance | What is still owed on your home loans. |
| children | Children to put through school | How many children the coverage should pay education for. |
| education | Education cost per child | What you expect college or other schooling to cost for each child. |
| existing | Life insurance you have | Coverage you already have, such as a policy through work. |
| savings | Savings your family could use | Savings and investments your family could spend, not counting retirement accounts you want to keep. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| need | Life insurance you need | The DIME total minus the coverage and savings you already have, and never below $0. |
| dime | DIME total | Debts + income × years + mortgage + education cost × children. |
| incomePart | Income to replace | Yearly income × years of income. |
| educationPart | Education | Education cost per child × children. |
| covered | Already covered | Life insurance you have + savings your family could use. |
| extra | Covered beyond the DIME total | How much the coverage and savings you have are more than the DIME total. Shown only then. |

## Method

DIME total = debts and final expenses + yearly income × years + mortgage balance + education cost per child × children; coverage needed = DIME total − life insurance you have − savings, and at least $0.

## Assumptions

- The DIME method is a rule of thumb for the coverage your family would need. It does not quote premiums or look at your health.
- Income is replaced in today’s dollars with no growth, inflation or investment return, and taxes are not included.
- Arithmetic is exact on the typed decimals; money shows to the cent, halves up.

## Worked examples

1. income = $70,000.00, years = 8, debts = $35,000.00, mortgage = $240,000.00, children = 1, education = $80,000.00 gives incomePart = $560,000.00, educationPart = $80,000.00, dime = $915,000.00, need = $915,000.00. Source: Mutual of Omaha, "To know if you have adequate life insurance it only takes a DIME", 2023: debt, income, mortgage and education added up (https://www.mutualofomaha.com/about/newsroom/article/to-know-if-you-have-adequate-life-insurance-it-only-takes-a-dime).
2. income = $70,000.00, years = 10, debts = $25,000.00, mortgage = $240,000.00, children = 2, education = $80,000.00, existing = $150,000.00, savings = $40,000.00 gives dime = $1,125,000.00, covered = $190,000.00, need = $935,000.00. Source: Mutual of Omaha, "To know if you have adequate life insurance it only takes a DIME", 2023: debt, income, mortgage and education added up (https://www.mutualofomaha.com/about/newsroom/article/to-know-if-you-have-adequate-life-insurance-it-only-takes-a-dime).
3. income = $0.00, years = 0, debts = $12,000.50, mortgage = $0.00, children = 0, education = $0.00, existing = $50,000.00 gives dime = $12,000.50, need = $0.00, extra = $37,999.50. Source: Mutual of Omaha, "To know if you have adequate life insurance it only takes a DIME", 2023: debt, income, mortgage and education added up (https://www.mutualofomaha.com/about/newsroom/article/to-know-if-you-have-adequate-life-insurance-it-only-takes-a-dime).

## FAQ

### What is the DIME method?

DIME stands for debt, income, mortgage and education. You add your debts and final expenses, the income your family would need for a number of years, your mortgage balance, and the cost of your children’s education. The total is the coverage the method suggests.

### How many years of income should I count?

A common choice is the number of years until your youngest child is grown, or 10 years. Use more years if your partner would need support for longer. The calculator lets you pick any number from 0 to 60.

### Why take off the insurance and savings I already have?

Because they would also be there for your family. A $150,000 policy through work and $40,000 of savings cover $190,000 of the need, so you only need to buy the rest.

### Does this calculator quote premiums?

No. It estimates the coverage amount only. What a policy costs depends on your age, health, the term and the insurer, so ask insurers for quotes once you know the amount.

### Should I count my income before or after tax?

The calculator uses the income you type. Life insurance death benefits are generally not taxed as income, so some people count after-tax income. Counting before-tax income gives a larger, more cautious number.

### Does the DIME method include inflation?

No. It adds today’s amounts with no growth or inflation, which keeps it simple. To allow for rising prices, count a few more years of income or a higher education cost.

### What if the result is $0?

Then the life insurance and savings you already have cover the DIME total. The calculator shows how much you have beyond it.

## Sources

- Mutual of Omaha, "To know if you have adequate life insurance it only takes a DIME" (October 11, 2023). https://www.mutualofomaha.com/about/newsroom/article/to-know-if-you-have-adequate-life-insurance-it-only-takes-a-dime
- Internal Revenue Service, Life insurance and disability insurance proceeds (death benefits are generally not taxable income). https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds