DIME Method
Méthode DIME in French
Quick definition
DIME is a shorthand for sizing a life insurance need: add Debt, Income replacement, Mortgage and Education, then subtract the coverage and liquid assets you already have.
What each letter covers
DIME turns a vague question into four countable ones. It is a needs analysis rather than a rule of thumb, which is why it usually produces a different answer from multiplying income by ten.
- D, Debt. Everything you owe apart from the mortgage, plus final expenses. Credit cards, car loans, student loans, and the cost of a funeral and settling an estate.
- I, Income. Your annual income multiplied by the number of years your family would need it. Ten years is the usual default.
- M, Mortgage. The full outstanding balance, so the family can stay in the home without a payment.
- E, Education. A per-child figure multiplied by the number of children.
Then subtract what already exists
The sum of the four is the total need, not the amount to buy. From it you subtract existing life insurance, including group coverage through work, and the liquid assets your family could actually reach quickly: a TFSA, non-registered investments, cash savings.
What is left is the gap. Locked-in retirement accounts and the home itself are usually excluded, on the grounds that the family cannot readily spend them without dismantling the plan the insurance is meant to protect.
Group coverage deserves a caveat. It is worth counting, but it usually ends when the job does and is rarely portable, so it is worth checking whether the plan still works if that number went to zero.
Choosing the years of income
Ten years is the conventional default and it is arbitrary. The better question is how long the household would actually need the money.
Two anchors are more defensible: the years until your youngest child is independent, and the years until your spouse could support the household alone. Whichever is longer is usually the right number.
For a family with a two-year-old, ten years stops the income replacement when the child is twelve. Twenty is not unreasonable in that case, and the difference in term life insurance premium is smaller than most people assume.
What DIME gets wrong, in both directions
It does not discount for investment returns. A lump sum meant to replace ten years of income would itself earn something while being spent, so DIME overshoots that component.
It also does not adjust for inflation over the replacement period, which pushes the other way. In practice the two errors partly cancel, and that is a large part of why the method has lasted: it is roughly right without requiring assumptions nobody can defend.
Its real blind spot is a stay-at-home parent. Someone providing full-time childcare produces substantial economic value with no income to replace, and DIME scores that at zero unless you deliberately price the replacement cost and add it in.
Finally, DIME sizes the coverage and says nothing about the product. Whether the answer should be 20-year term, 30-year term or something permanent is a separate decision.
In Canada
Canadian education costs make the E in DIME easier to estimate than in many countries. Statistics Canada put average undergraduate tuition for Canadian full-time students at $7,734 for 2025/2026, so roughly $31,000 covers four years of tuition before residence, food or books.
A Registered Education Savings Plan already in place should be subtracted from the education component, since it is money earmarked for exactly that purpose and carries the CESG grant on top.
Canada Pension Plan survivor and children's benefits exist and are modest. They are real income and can reasonably reduce the income component slightly, but they are far from a replacement and are subject to their own contributory eligibility rules.
Worked example
Priya earns $85,000, owes $25,000 on a car loan, carries a $380,000 mortgage and has two children. She budgets $15,000 for final expenses and $31,000 per child for education, and wants ten years of income replaced. Her DIME total is $40,000 of debt plus $850,000 of income plus $380,000 of mortgage plus $62,000 of education, which is $1,332,000. She has $200,000 of group coverage at work and $50,000 in a TFSA, so her gap is $1,082,000. The 10x rule would have suggested $600,000, which would have left the mortgage and the education entirely unfunded.
Related terms
Reviewed by Alexandre Bernier, CFP®, CIM®, PFP®·Updated September 2026