Life Insurance Calculator

Life insurance provides a tax-free lump sum to your beneficiaries if you die, replacing your financial contribution to the household so your family can maintain their standard of living, stay in their home, and meet future goals. The hardest part for most people isn't whether to buy it, but figuring out how much — and that's where a structured method helps.

The DIME method is a widely used framework that adds up four categories of need. Debt covers all your non-mortgage obligations — credit cards, car loans, personal and student loans — so your family isn't left to service them. Income replacement is usually the largest piece: it multiplies your annual income by the number of years your dependents would need support, ensuring they can replace your earnings while they adjust, raise children, or reach retirement. Mortgage covers your remaining home loan balance so your family can stay in the house free and clear. Education estimates the future cost of sending your children to college.

Adding these four together gives a gross coverage need. From that you subtract your existing financial resources — savings, investments and any life insurance you already hold, such as a policy through work — because those assets already provide some of the cushion. The result is the additional coverage you should consider buying.

DIME is intentionally straightforward, and its simplicity is its strength: it captures the major financial shocks a family faces. More detailed approaches, like the human-life-value or needs-analysis methods, can refine the figure by accounting for inflation, the surviving spouse's income, investment returns on the payout, and final expenses. But DIME gets most families to a sensible ballpark quickly.

For most people, term life insurance — coverage for a set period like 20 or 30 years — provides the largest benefit for the lowest cost and aligns well with the years your family is most financially vulnerable. Whole-life and other permanent policies cost far more and serve narrower purposes. Whatever type you choose, knowing your coverage target prevents both the risk of being underinsured and the waste of paying for more than you need. This calculator gives you that target so you can shop with confidence.