Most people walk into a life insurance conversation with a number an agent gave them. That’s backwards. Your number should come from your life, not someone’s commission structure. Here’s how to build it yourself in about 15 minutes.
The DIME Formula (Your Real Coverage Number)
Skip the “10x your salary” rule—it’s dangerously generic and ignores what you owe. According to a recent LIMRA study, nearly half of all households with children under 18 would face immediate financial hardship within six months of a primary earner’s death. The fix is the DIME method, which stacks four concrete obligations:
- Debt: All non-mortgage debt—credit cards, car loans, student loans, personal loans. Total it.
- Income replacement: Multiply your annual after-tax income by the number of years your family would need that paycheck to keep functioning. For young children, 15–20 years is standard.
- Mortgage payoff: The remaining balance on your home loan. Not the monthly payment—the full payoff amount.
- Education costs: Current average in-state tuition, room, and board runs roughly $25,000–$35,000 per year per child at a public university, and that figure climbs annually.
Add those four lines together. That’s your starting point.
Subtract What You Already Have
Now subtract every asset your family could tap: current savings and investments, any existing life insurance through work or private policies, and—if your spouse or partner works—their income, since it reduces the full replacement burden. What’s left is your coverage gap. That’s the number you need, not a penny more.
This gap number is your anchor. When an agent suggests a policy, you compare it to your gap, not their pitch. If the coverage falls short, you’re underinsured. If it blows past your gap by hundreds of thousands, you’re being oversold.