Fact-checked and reviewed by Kiruba Shankar Eswaran or another licensed agent on our team. Read our editorial standards.
This guide is for general educational purposes and is not insurance advice. Product features, availability, and amounts vary by state and by policy. Always review the official plan documents for the full terms, limitations, and exclusions before you buy.
A practical US guide to life insurance for self-employed workers: why you start with zero coverage, term vs whole life, how much you need (DIME), taxes, and applying honestly with a high-risk job.
A practical US guide to term life insurance for seniors in their 50s, 60s and 70s: how term length shrinks with age, the health questions that trigger declines, and why guaranteed issue is often the better fit.
When it comes to life insurance, many people either drastically underestimate their needs or simply pick an arbitrary number like "10 times my salary." But your family's financial security is too important for guesswork. That's where the DIME method comes in.
DIME is a powerful, personalized approach that helps you calculate how much life insurance coverage you need, so your loved ones are truly protected if you're no longer there. It stands for:
Want a little help with the calculations? Use this spreadsheet to follow along with the explanation.
Imagine trying to build a house without a blueprint. You wouldn't know how much wood, nails, or concrete you'd need. The DIME method gives you that blueprint for your financial future. It accounts for the major expenses your family would face, giving you a clear, defendable number that reflects their actual needs.
Let's break down each component and see how you can use DIME to build a robust financial safety net.
Start by listing all your outstanding debts, excluding your mortgage (we'll get to that later).
The National Funeral Directors Association puts the median cost of a funeral with viewing and burial at about $8,300, and around $6,280 for cremation with a viewing and memorial service. Those figures cover the funeral home's services and typically exclude cemetery costs such as a plot, vault, and monument, which can add several thousand dollars more. Including a realistic final expense figure means your family isn't hit with these bills during a time of grief.
This is often the largest component, and it covers the income your family relies on to maintain their lifestyle.
Formula: Annual take-home pay × number of years = income replacement total
Because this is often the largest component of your calculation, revisit this section if your coverage amount comes out higher than you expected. To keep premiums affordable, have an honest conversation with your partner about what your household would actually need. Could they get by on half of your income?
Your home is likely your most significant asset and often your largest debt.
The goal here is to provide enough funds so your family could pay off the mortgage entirely. This removes a massive financial burden, ensuring they can stay in their home without a monthly payment hanging over their heads.
That said, mortgages are often shared between two earners. If accounting for the full balance drives up your premiums, talk to your partner about the best path forward. You can always agree to cover a portion of the mortgage instead.
If you have children, consider their future education costs.
Factor in what you realistically want to contribute to each child's education, and discuss your plans with your partner. Providing a larger amount might result in higher premiums, but it lowers the chance of your children having to take on loans.
We've put together a DIME worksheet to help you make the final calculations.
Your DIME calculation gives you your total ideal coverage. However, you might already have some life insurance, for example through your employer, or significant liquid savings your family could draw on.
Subtract any existing coverage and liquid assets from your DIME total to find out how much additional life insurance you actually need to buy. If your family would also qualify for Social Security survivor benefits, that is worth factoring into the income component rather than treating it as a lump sum.
Sarah Miller is 40, with one 13-year-old child. Her take-home pay is $75,000 a year. She has a $5,000 car loan and $100,000 left on her mortgage, and no credit card debt. She wants to leave $50,000 to help with her child's university costs.
Sarah's total DIME need: $15,000 + $375,000 + $100,000 + $50,000 = $540,000
That's the starting number. But Sarah already has a life policy through work that pays two times her salary, or $150,000. She has also saved $25,000 toward university costs.
Her final coverage need: $540,000 − $150,000 (existing cover) − $25,000 (existing savings) = $365,000
One caveat worth remembering: Sarah's group policy through work almost certainly ends if she leaves that job. Personal coverage is what moves with you.
The DIME method helps you avoid being underinsured, which could leave your family in a difficult financial situation. It also prevents you from overpaying for coverage you don't need. By understanding the real costs your family would face, you can make an informed decision and secure genuine peace of mind.
