Most people either wildly overestimate what a policy costs or wildly underestimate how much they need. Both mistakes cause the same result — no coverage at all. Let's fix the second one first.
Why "10x your income" only sort of works
You've probably heard the rule: buy 10 times your annual income. It's a fine starting point, but it treats every family the same. Someone with three kids and a mortgage needs very different coverage than a single renter making the same salary.
A better approach is the DIME method. It stands for Debt, Income, Mortgage, Education — the four buckets your policy should actually cover.
The DIME method, step by step
D — Debts (excluding your mortgage)
Add up everything you'd leave behind: credit cards, car loans, student loans, medical bills, personal lines of credit. Toss in a reasonable estimate for final expenses too — funerals average $8,000 to $12,000 in most parts of the country.
I — Income replacement
Multiply your annual income by the number of years your family would need it. Most people pick somewhere between 10 and 20 years — long enough to raise young kids, pay off the house, and let a surviving partner get back on their feet.
If your youngest is a toddler, lean toward 20 years. If they're already in high school, 10 might be plenty. There's no wrong answer, only a personal one.
M — Mortgage
Use your current mortgage balance, not the original loan amount. If your home is nearly paid off, this bucket shrinks a lot. If you just bought, it's probably your biggest number.
E — Education
Estimate what you'd want to leave for each child's schooling. A common ballpark: $100,000 per kid for public in-state college, $200,000+ if you're planning for private. Multiply by the number of children.
Try the coverage calculator.
A DIME-method estimate in under a minute — no email required.
Add it up, then breathe
Sum the four buckets. That's your target coverage. For most young families it lands somewhere between $500,000 and $1.5 million — a number that sounds big until you break it into monthly premium for a 20- or 30-year term policy, at which point most people are pleasantly surprised.
Round up to a clean number that fits carrier increments — usually $250,000, $500,000, $750,000, $1,000,000. Slightly more coverage rarely costs much more, and it gives your family a cushion instead of a tight budget.
When to adjust up or down
- Adjust up if you're the sole earner, if your spouse has health issues that would limit their earning, or if you have special-needs dependents who'll rely on you long-term.
- Adjust down if your spouse has strong independent income, if you have significant savings already, or if your kids are grown and the house is paid off.
What DIME doesn't cover
DIME gives you a solid coverage amount. It doesn't tell you which product to buy — that's a conversation about your budget, health, and how long you actually need the coverage. A 30-year term covers most families beautifully. A whole life policy makes more sense in specific estate-planning situations.
And here's the honest truth: this is a starting point, not advice. A licensed advisor can refine your number, factor in existing coverage from work, and match you to a carrier that fits your health history — all in about 15 minutes, for free.