Life Insurance Needs Calculator (DIME)

Coverage needed = (Annual income × Years to replace) + Total debts + Final expenses − Existing coverage − Liquid savings

• Years to replacehow long survivors need the income: commonly until the youngest child finishes education, or to the surviving spouse retirement
• Total debtsmortgage balance, car loans, credit cards, student loans, anything not extinguished at death
• Final expensesfuneral, probate, medical bills, estate settlement costs
• Liquid savingsassets survivors could actually draw on, excluding the home they live in

• Multiplying income by years ignores both inflation and the return survivors would earn on a lump sum, and the two partly cancel. A more careful version discounts the income stream at the real rate of return, which usually lands somewhat below the simple product, so the straight multiplication is the conservative choice.
• Employer group cover is the resource people most overcount. It typically ends the day employment does, is rarely portable at a sensible price, and often caps at one or two times salary, so treating it as permanent coverage leaves a gap that appears precisely when someone changes jobs or falls ill.
• A non-earning spouse still needs cover. Replacing childcare, household management, and the earning partner lost work time runs into real money, and the capital-needs formula misses it entirely if you enter zero income.
• Level term is the product that matches this calculation, because the need declines as the mortgage amortises and children age out. Permanent policies cost several times as much per dollar of death benefit and solve a different problem, usually estate liquidity or a lifelong dependant.
• Retirement savings earmarked for the survivor own retirement should not be subtracted here. Counting it twice makes the gap look smaller than it is.