DIME Method
Formula for calculating life insurance need: Debt + Income (10x) + Mortgage + Education.
Full explanation
The DIME method is a common rule-of-thumb formula for estimating how much life insurance you need: Debt (outstanding loans, credit cards, car loans, student loans) + Income (10x annual income, covers 10-15 years of replacement) + Mortgage (full mortgage payoff) + Education (projected college costs for each child). For a 35-year-old earning $80,000 with two kids and a $300,000 mortgage and $0 other debt: DIME = $0 + $800,000 + $300,000 + $200,000 = $1.3M of 20-year term. Alternative simpler rule: 10-12x annual income for a working adult with dependents.
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