How much life insurance do you need? Start with DIME

Ask most people how much life insurance they need and you'll hear a guess, or whatever their employer happens to offer. DIME replaces the guess with four questions about what your family would actually have to pay for if your income stopped.

D is for debt

Add up everything you owe except your mortgage: car loans, credit cards, student loans, medical bills. Many people also add final expenses here.

I is for income

Multiply your yearly income by the number of years your family would need it. Ten years is a common starting point. Families with young children often choose more.

M is for mortgage

Use your mortgage payoff balance, so your family can stay in the home without a payment.

E is for education

Estimate what you want to set aside for each child's education, then multiply by the number of children.

Then subtract what you already have

Take your total and subtract existing life insurance and savings your family would use. What's left is your coverage gap. For a family with $28,000 in debt, $65,000 of income to replace for 10 years, a $210,000 mortgage, and two children at $80,000 each, the need comes to $1,048,000. With $115,000 already in place, the gap is $933,000.

Workplace coverage is often one or two times salary, which can fall far short of that total. And it usually ends when the job does.

DIME is a starting point, not a full needs analysis. It doesn't account for inflation, investment growth, or Social Security survivor benefits.