Life Insurance Calculator
It sizes a life insurance policy using the DIME method — debt, income replacement, mortgage and education — then subtracts cover and savings you already hold.
Additional cover needed
$1,095,000
Income replacement
$800,000
Mortgage
$250,000
Education
$200,000
Other debt
$20,000
Total need
$1,285,000
Already covered
$190,000
Term life costs a fraction of whole life for the same cover, and suits most families since the need itself is temporary. Match the term to the need — until the youngest child is independent, or the mortgage is repaid.
A planning estimate, not insurance or financial advice. Employer cover usually ends with the job, so count it cautiously.
What it calculates
It sizes a life insurance policy using the DIME method — debt, income replacement, mortgage and education — then subtracts cover and savings you already hold.
Why it matters
Guessing at a round number leaves families either underinsured at the worst possible moment or paying premiums for cover they never needed.
Who it's for
Anyone with dependents, a mortgage, or a partner who relies on their income, and parents reviewing cover after a birth or a house move.
Formula
- D
- Debt other than the mortgage
- I
- Income replacement — annual income times years
- M
- Mortgage balance outstanding
- E
- Education costs for each child
Worked example
$80,000 income, $250,000 mortgage, two children
- 1Income replacement = 80,000 × 10 years = $800,000
- 2Education = 2 × 100,000 = $200,000
- 3Add mortgage 250,000, debts 20,000, final expenses 15,000
$1,285,000 of cover, about 16 times income
How the life insurance calculator works
DIME totals four needs that would otherwise fall on your family: debts they would inherit, the income your household would lose, the mortgage that still has to be paid, and education you intended to fund. Final expenses are added, then existing cover and liquid savings are subtracted to give the genuine gap. The income replacement term is the judgement call — ten years is a common default, but supporting young children to adulthood may need considerably more. The result usually lands between ten and fifteen times annual income, which is why that rule of thumb persists.
DIME totals four needs that would otherwise land on your family: debts they inherit, the income the household loses, the mortgage that still has to be paid, and education you intended to fund.
The years of income replacement is the judgement call. Ten is a common default, but supporting young children to adulthood usually needs considerably more.
Common mistakes
- Relying on employer cover alone, which is usually a small multiple of salary and ends with the job.
- Ignoring a non-earning partner, whose childcare and household work would have to be paid for.
- Choosing a policy term that ends before the children are independent or the mortgage is repaid.
- Forgetting to update cover after a move, a birth or a large change in income.
Tips and best practice
- Term life is a fraction of the cost of whole life for the same cover; buy term unless you have a specific estate reason not to.
- Match the term to the need — until the youngest child finishes education, or the mortgage is repaid.
- Lock in cover while you are young and healthy; premiums are priced on age and health at purchase.
Frequently asked questions
How much life insurance do I need?
Most households land between ten and fifteen times annual income. The DIME method sizes it properly from your actual debts, mortgage, income and education plans.
What is the DIME method?
A way of totalling four needs — Debt, Income replacement, Mortgage and Education — then subtracting existing cover and savings to find the gap.
Is life insurance through work enough?
Rarely. Employer cover is usually one or two times salary and disappears when you leave the job, exactly when replacing it may be hardest.
Should I buy term or whole life?
Term costs far less for the same cover and suits most families, since the need itself is temporary. Whole life is generally an estate planning tool.
Do I need cover for a stay-at-home parent?
Usually yes. The childcare, transport and household work they provide would have to be paid for, and that cost is substantial over many years.
Related calculators
Methodology & trust
- Formula source
- DIME needs-analysis method used in standard insurance needs planning
- Last updated
- 2026-07-28
- Privacy
- Every calculation runs in your browser. No inputs are sent to a server or stored.