The DIME framework is the most common approach to estimating life insurance need. It covers four categories of financial obligations your survivors would face.
DIME components
- Debt: all debts except mortgage (car loans, credit cards, student loans)
- Income replacement: your annual income × years to replace (until kids grown and spouse can self-support)
- Mortgage: outstanding mortgage balance so the home is paid off
- Education: estimated costs for children’s post-secondary education
Subtract existing life insurance and accessible savings to find the gap. Term life insurance is usually the most cost-effective way to close that gap.