Short answer: most families need enough life insurance to cover their Debt, replace 10 to 15 years of Income, pay off the Mortgage, and fund their children's Education, minus the savings and coverage they already have. That is the DIME method, and for a typical family earning $80,000 with two kids and a near-average mortgage it points to roughly $1.25 million of term coverage. Below we work that number step by step.
Key takeaways
- DIME = Debt + Income + Mortgage + Education, minus assets you already have.
- It is more accurate than the "10 times income" rule because it uses your real mortgage, debts and college costs.
- Only about 51% of U.S. adults owned life insurance in 2025, and roughly 100 million are uninsured or underinsured (LIMRA).
- Our sample family's DIME need works out to about $1.25 million of term coverage — far above a typical $50,000 group policy.
- You can size your own number in about ten minutes with our DIME calculator, then confirm it with a licensed advisor.
Why a formula beats a guess
"How much life insurance do I need?" is one of the most common questions we hear at TSM Life & Health — and one of the easiest to get wrong by guessing. Buy too little and your family faces a shortfall at the worst possible moment; buy far too much and you pay for coverage you do not need. A simple formula keeps you honest.
The stakes are real because under-coverage is widespread. According to the 2025 LIMRA and Life Happens Insurance Barometer Study, only about 51% of American adults reported owning any life insurance in 2025. LIMRA further estimates that 74 million adults have no coverage but say they need it, and another 25 million know they are underinsured — a coverage gap of close to 100 million people. Being underinsured is often the more dangerous trap, because a small policy can create a false sense of security.
The U.S. life insurance coverage gap
Number of American adults, in millions, who are uninsured or underinsured (2025)
What the DIME method is
DIME is an acronym for the four big obligations a death benefit typically needs to cover. You total them up, then subtract the money your family already has available. It is the method we most often reach for because it forces you to look at your real balance sheet instead of a rule of thumb.
- D — Debt: all non-mortgage debt (credit cards, auto loans, personal or student loans) plus a cushion for final expenses. The NFDA puts the median funeral with viewing and burial at about $8,300 in 2024.
- I — Income: your annual income multiplied by the number of years your family would need it replaced — commonly 10 to 15.
- M — Mortgage: the remaining balance on your home, so your family can stay put without the monthly payment. The average U.S. mortgage balance topped $250,000 in 2024 (Experian).
- E — Education: estimated schooling costs per child. Four years of tuition, fees, room and board at a public in-state university averaged about $29,910 per year in 2024-25 (College Board) — roughly $120,000 per child.
The DIME formula in one line: (Debt + final expenses) + (Income × years) + Mortgage + Education − (savings + existing coverage) = the death benefit to shop for.
A worked DIME example
Let's put real numbers to it. Meet the Riveras. Maria is 38, earns $80,000 as the primary wage earner, and has two young children. The family carries a $250,000 mortgage balance, a $16,000 car loan, $6,000 in credit-card balances, and has $20,000 in savings plus a $50,000 group life policy through Maria's employer.
| DIME component | What it covers | Amount |
|---|---|---|
| Debt + final expenses | $16,000 auto + $6,000 cards + ~$8,000 funeral (NFDA 2024) | $30,000 |
| Income replacement | $80,000 annual income × 10 years | $800,000 |
| Mortgage | Remaining balance, near the U.S. average (Experian 2024) | $250,000 |
| Education | 2 children × ~$120,000 (public in-state est., College Board) | $240,000 |
| Total need | Sum of the four DIME components | $1,320,000 |
| Less existing assets | $20,000 savings + $50,000 group policy | −$70,000 |
| Coverage to shop for | Total need minus what you already have | ≈ $1,250,000 |
Rounding to a clean, easy-to-quote figure, Maria would likely shop for a $1.25 million, 20-year term policy — long enough to carry the family until the mortgage is largely paid and the children are through school. Notice how far that is from the $50,000 her group plan provides. That gap, multiplied across millions of households, is exactly the underinsurance problem the LIMRA data describes.
Sizing the need: the four DIME components
Rivera family example — household earning $80,000 with two children (illustrative)
Skip the arithmetic: our DIME calculator does this math for you — enter your debts, income, mortgage and education goals and it returns a target death benefit in seconds.
How to adjust DIME for your life
DIME is a starting framework, not a straitjacket. A few common situations change the math:
- No mortgage or no kids? Drop those components. Your need may fall to debts, final expenses and a few years of income for a surviving partner.
- Stay-at-home parent? Run DIME with an "income" line equal to what it would cost to replace childcare and household work — often several hundred thousand dollars while the children are young.
- Two earners? Run DIME separately for each paycheck the family would actually lose.
- Near retirement? Fewer income-replacement years and a shrinking mortgage usually mean a smaller policy — sometimes just a final expense plan.
Once you know how much, the next question is what kind. For most working families, term life is the affordable way to buy a large death benefit for the income-replacement years, while permanent coverage suits lifelong needs. We compare them in Term vs. Whole vs. IUL in 2026, and go deeper on sizing in How Much Life Insurance Do You Need in 2026. Any policy guarantee depends on the claims-paying ability of the issuing carrier.
Group coverage is a starting point, not a plan. Employer life insurance is convenient but is usually capped at one or two times salary and typically ends when you leave the job. Treat it as a supplement to a policy you own.
Turning your number into a policy
You can get remarkably close on your own: run the DIME method with your real debts, income, mortgage and education goals, subtract what you already have, and you have a defensible target. Where a licensed advisor adds value is in the details — choosing the right term length, deciding whether any permanent coverage belongs in the mix, and making sure the policy is owned and structured correctly. We walk through this on a whiteboard as part of the TSM process, and you can see how life coverage fits our other planning work on the life insurance services page. This article is general education, not individualized insurance, tax or legal advice.
Not sure what your DIME number is?
Try our DIME calculator, then sit down with a licensed advisor to pressure-test the result — no cost, no pressure, just clear answers about the coverage that fits your family.
Book a Free ConsultationFrequently asked questions
DIME stands for Debt, Income, Mortgage and Education. You add up your non-mortgage debt plus final expenses, the income your family would need replaced (annual income times the number of years), your remaining mortgage balance, and your children's estimated education costs. Then you subtract the savings and existing coverage you already have. The result is roughly the death benefit to shop for.
Most families replace 10 to 15 years of income, long enough to carry the household until the children are grown and the mortgage is largely paid down. Younger families with small children often choose the higher end; households closer to retirement usually need fewer years. There is no single correct figure, only the number that fits your timeline.
Subtract liquid assets your family could realistically use, such as savings and any life insurance you already own, including a group policy through work. Retirement accounts are a judgment call: money earmarked for a surviving spouse's retirement is often left out of the offset so it is not spent early. A licensed advisor can help you decide what to count.
The 10-to-12-times-income rule is a fast sanity check, but it ignores your actual mortgage balance, debts, and college costs. The DIME method uses your real numbers, so it usually produces a more accurate figure. A good approach is to run the income multiple for a ballpark, then refine it with DIME.
Your need is usually smaller, but rarely zero. With no mortgage and no children, the DIME total may come down to paying off remaining debts, covering final expenses of about $8,300 for a funeral with viewing and burial, and replacing enough income to protect a spouse or partner. Many people in this situation still carry a modest term or final expense policy.
Run DIME separately for each earner. The income component should reflect the paycheck the family would actually lose if that person died. Many households insure both working spouses, and often a stay-at-home parent too, because replacing unpaid childcare and household work has a real dollar cost.
Written by
Keith McLiverty
Keith is the founder and COO of TSM Life & Health, with more than 30 years in finance, taxes, medical insurance and retirement planning. He believes in educating first and planning second, so every client understands the "why" behind their coverage. This article is general education, not individualized insurance, tax or legal advice.
Related reading
Sources & methodology
Statistics on this page were verified against the sources below on July 31, 2026. Figures for the sample family are illustrative and combine these published averages; your own numbers will differ.
- 2025 Insurance Barometer Study — LIMRA & Life Happens (51% ownership; 74M uninsured-but-need-it; 25M underinsured; ~100M coverage gap).
- Funeral Costs & Statistics (2024) — National Funeral Directors Association (~$8,300 median funeral with viewing and burial).
- Average U.S. Mortgage Debt — Experian (2024) (average balance above $250,000).
- Trends in College Pricing 2024 — College Board (~$29,910/yr public in-state, tuition, fees, room & board).