Life Insurance Calculator: the DIME Method
How much coverage you need, using the DIME method
Your situation
D: Debt and final expenses
Credit cards, car loans, lines of credit, student loans.
Funeral, estate settlement and probate costs.
I: Income to replace
Ten years is the usual starting point. Replace to your youngest child's independence if that is longer.
M: Mortgage
E: Education
Default is about four years of average Canadian undergraduate tuition. Add housing and living costs if you intend to cover them.
What you already have
Group coverage through work plus any individual policy.
TFSA, non-registered investments, savings. Money your family could actually reach quickly.
Where the need comes from
The DIME breakdown
DIME versus the 10x rule
The simplest rule of thumb is ten times your income. It is fast and it ignores your actual debts, mortgage and family, which is why DIME usually gives a different answer.
| Method | Coverage suggested |
|---|---|
| DIME method | $1,082,000 |
| 10x annual income | $600,000 |
DIME suggests $482,000 more than the 10x rule for your situation.
The DIME method explained
DIME is a needs analysis rather than a rule of thumb. It asks what your family would actually have to pay for if your income stopped, then subtracts what they already have.
What each letter covers
D is for Debt. Everything you owe that is not the mortgage, plus final expenses. Funerals in Canada commonly run into five figures, and estate settlement costs money before anything is distributed. I is for Income. Your annual income multiplied by the number of years your family would need it. Ten years is the common default. The better question is how long until your youngest child is independent, or until your spouse could support the household alone. M is for Mortgage. The full outstanding balance, so the family can stay in the home without a payment. E is for Education. A per-child figure multiplied by the number of children. Statistics Canada put average undergraduate tuition at $7,734 for 2025/2026, so roughly $31,000 covers four years of tuition alone, before residence, food or books. Add them, subtract your existing coverage and the liquid assets your family could actually reach, and what is left is the gap.
What DIME misses
DIME 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 slightly overshoots on 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, which is part of why the method has survived: it is roughly right without needing assumptions nobody can defend. It says nothing about the kind of policy. DIME sizes the coverage; whether that should be 20-year term, 30-year term or something permanent is a separate question, and for most families with children the answer is term. It also ignores a stay-at-home parent's economic contribution, which is real and often large. If one parent provides full-time childcare, price what replacing that care would cost and add it to the income component.
Reading your number
The figure above is a starting point for a conversation, not a quote. Underwriting, health, smoking status and age determine what it actually costs, and those vary far more between people than the coverage amount does. Group coverage through work is worth counting but not relying on. It usually ends when the job does, it is often capped at one or two times salary, and it is rarely portable. Subtract it in the calculator, then consider whether your plan still works if it disappeared. If the number looks alarming, remember that term life insurance is priced per thousand dollars of coverage and the marginal cost of more coverage is small. The gap between $500,000 and $1,000,000 of term coverage is usually much smaller than people expect.
Related calculators
Explore these complementary tools to go further:
- Estimate child life insurance coverage, and where it belongs in your plan
- Find the monthly disability benefit you need and your coverage gap
- Size the tax-free lump sum you would need after a serious diagnosis
- Run a full Canadian mortgage scenario with amortization
- Track your monthly income and expenses by category
Frequently Asked Questions
Last updated: July 2026
The DIME method gives a defensible starting figure: add your non-mortgage Debts and final expenses, the Income your family would need (annual income times the years to replace), your Mortgage balance, and Education costs per child, then subtract existing coverage and liquid assets. For a household with $85,000 of income, a $380,000 mortgage and two children, the total need often lands between $1 million and $1.5 million before offsets.
Debt, Income, Mortgage, Education. Debt covers everything you owe apart from the mortgage plus final expenses. Income is your annual income multiplied by the years your family would need it, commonly ten. Mortgage is the full outstanding balance. Education is a per-child figure times the number of children.
Reviewed by Alexandre Bernier, CFP®, CIM®
Educational tool - estimates only. Not individualized financial, investment, tax, or legal advice. Using it does not create an advisor-client relationship. Rules and figures change; verify against current CRA sources and consult a qualified professional. Editorial policy →