How to calculate life insurance cover
The DIME method (Debt, Income, Mortgage, Education) evaluates your total family obligations to establish an adequate financial safety net.
By offsetting your existing savings and current insurance coverage against total liabilities and future living costs, you find the exact net insurance amount to purchase.
Worked example: Family cover assessment
An individual earning $45,000 annually wanting 10 years of income replacement ($450,000) with a $180,000 mortgage, $10,000 in debts, $25,000 education fund, and $5,000 funeral expenses has a gross need of $670,000. Offsetting $20,000 in savings results in a recommended life insurance cover of $650,000.
Inputs for the life insurance calculator
Annual Income
Your net or take-home annual income to replace for your dependents.
Replacement Years
Number of years of income required until children reach financial independence.
Mortgage Balance
The principal amount needed to pay off the family home mortgage.
Other Debts
Personal loans, credit card balances, and vehicle finance to clear.
Education Fund
Dedicated future tuition and childcare reserves for your children.
Funeral Expenses
Estimated burial or cremation and final estate administration costs.
Existing Savings
Liquid assets, savings accounts, and investments available to dependents.
Existing Cover
Current policies or employer-provided death-in-service coverage.
CALCULATOR QUESTIONS
Life insurance calculator questions
How many times my salary should life insurance cover?
Financial advisers typically recommend between 7 and 10 times your annual gross salary, plus any outstanding mortgage debt.
What is the difference between term and whole life insurance?
Term life covers you for a fixed period (such as 20 or 25 years), while whole life covers you for your entire lifetime and includes an investment cash value element.