Life Insurance Needs Calculator
Work out cover using the DIME method, and see how far the ten-times-income rule of thumb misses for your household.
"Real return" means growth above inflation, which is why 3% is a reasonable figure where a nominal return would not be. This is a needs estimate, not advice about a policy, and it takes no view on what any of it should cost. Nothing is uploaded.
Ten times income is not a number about your life
The DIME method adds four things: Debts, Income replacement, Mortgage, Education. The rule of thumb uses one, and only indirectly — so the two disagree by however large your mortgage and your children's education happen to be. Across three ordinary households below, the ratio between what is needed and what the rule suggests spans a factor of 4.7.
| DIME need | Ten times income | Ratio | Income replacement is | |
|---|---|---|---|---|
| Young family, big mortgage | $1,526,423 | $700,000 | 2.18× | 68% of it |
| Mid-career, half paid off | $1,113,860 | $900,000 | 1.24× | 80% of it |
| Older, house paid, no children | $394,275 | $850,000 | 0.46× | 99% of it |
The young family needs more than twice what the rule suggests; the older household with the house paid and nobody to educate needs less than half. That is not a rule with occasional exceptions — it is a rule that cannot tell those two apart, because the mortgage that separates them is not one of its inputs. It is a reasonable opening guess in the absence of any other information, and the four numbers that replace it are ones you already know.
Replacing an income costs less than income times years
Twenty years of $70,000 is not $1,400,000, because a lump sum earns something while it is being drawn down. At a 3% real return it is $1,041,423 — 74% of the naive figure. Since income replacement is between two thirds and virtually all of the total, ignoring that overstates the whole answer by close to a third.
| Real return assumed | Capital needed | Against income × years |
|---|---|---|
| 0% | $1,400,000 | 100% |
| 1% | $1,263,189 | 90% |
| 2% | $1,144,600 | 82% |
| 3% | $1,041,423 | 74% |
| 5% | $872,355 | 62% |
At a zero real return the two agree exactly, which is the check that the arithmetic is doing what it claims. The assumption is doing real work here, so it is worth being conservative with: a household that will hold the money in cash is closer to the top row than the bottom one, and the difference between those two rows is more than half a million dollars.
How to use
- Enter debts, the income to replace, the mortgage and any education to fund.
- Set how many years of income need covering.
- Read the total and what share each part contributes.
- Subtract cover you already hold to get the shortfall.
Frequently asked questions
How much life insurance do I need?
The DIME method adds four things: Debts, Income replacement, Mortgage and Education. For a young family with a $320,000 mortgage and two children to educate that comes to about $1.5 million; for someone the same age with the house paid off and nobody to educate, under $400,000. The four numbers are ones you already know.
Is ten times income good enough?
It uses one of those four inputs and only indirectly, so it cannot tell those two households apart. Across the three examples on the page the ratio between real need and the rule spans a factor of nearly five — 2.18 times for the young family, 0.46 for the older one. It errs in both directions, so it is not even a cautious default.
Why does the mortgage matter so much?
Because it is a debt that does not shrink when your income stops, and for most households it is the largest single number in the calculation after income replacement. A rule based on salary alone is blind to whether you owe $320,000 on a house or nothing.
Does replacing an income really cost income times years?
No, it costs less, because a lump sum earns something while it is being drawn down. Twenty years of $70,000 is $1,400,000 undiscounted and $1,041,423 at a 3% real return — about three quarters. Since income replacement is most of the total, ignoring that overstates the whole answer by close to a third.
What is a real return?
Growth above inflation, which is why 3% is a reasonable figure where a nominal 3% would not be. The assumption does real work here: the gap between assuming nothing and assuming 5% is more than half a million dollars on the example above, so it is worth being conservative.
How many years of income should I replace?
Commonly until the youngest child is independent, or until a surviving partner reaches retirement. There is no correct answer, which is why it is an input rather than a default — and it is the single figure that moves the total most.
Should I subtract cover I already have?
Yes, including group cover through an employer, though that generally ends when the job does. What is left is the shortfall, which is the number to shop with rather than the gross need.
Does this send anything anywhere?
No. Every figure is computed in your browser, and nothing is uploaded or stored.
🔒 This tool runs entirely in your browser. Nothing you enter is uploaded, logged, or stored.