DIME method
A formula for calculating life insurance needs: Debt, Income, Mortgage, Education.
Full definition
The DIME method is a practical framework for calculating how much life insurance you need. D = all outstanding debts (credit cards, car loans, personal loans — excluding mortgage). I = income × years of replacement needed. M = remaining mortgage balance. E = estimated future education costs per child. Add these four numbers and subtract any existing life insurance coverage to get your coverage gap.
Real-world example
Debt: $25,000. Income: $65,000 × 15 years = $975,000. Mortgage: $220,000. Education: 2 kids × $100,000 = $200,000. Total need: $1,420,000. Minus existing group life: $130,000. Coverage gap: $1,290,000.
Quick summary
A formula for calculating life insurance needs: Debt, Income, Mortgage, Education.
Related terms
- Term life insurance
Life insurance that covers you for a fixed period, typically 10–30 years.