Life Insurance Calculator
How much life cover does your family actually need? This calculator uses the DIME method — debts, income, mortgage and children's costs — minus what you already have, to size the right amount.
Last updated 4 July 2026 · Written and reviewed by Mustafa Bilgic
Life insurance calculator
How much cover you need — the DIME method.
A guide to sizing cover, not financial advice. Consider speaking to a protection adviser.
How much life insurance do you need?
Life insurance pays out a lump sum if you die during the policy term, so your family can clear debts and keep their standard of living. There's no single right number — it depends on your commitments. A widely used starting point is the DIME method: add up your Debts, Income to replace, Mortgage and Education or children's costs, then subtract any cover and savings you already have.
With a £180,000 mortgage, £10,000 of other debt, £35,000 income to replace for 10 years and £30,000 for the children, the DIME total is £570,000 of cover — before deducting any existing policy or savings.
The DIME method in detail
Debts are anything your family would need to clear — personal loans, credit cards, car finance. Income replacement is your annual income multiplied by the number of years your family would need support; ten years is a common choice, or until the youngest child is independent. Mortgage is the outstanding balance, so the home is paid off outright. Education covers childcare, school and university costs. Adding these gives a needs-based figure rather than a guess.
| DIME element | What to include |
|---|---|
| Debts | Loans, credit cards, car finance, overdrafts |
| Income | Annual income × years to replace |
| Mortgage | Outstanding balance to clear the home |
| Education | Childcare, school and university costs |
Term vs whole-of-life
Most families use term life insurance, which covers a set period — often until the mortgage ends or the children grow up — and is far cheaper than whole-of-life cover that pays out whenever you die. Level term keeps the payout constant; decreasing term falls in line with a repayment mortgage and is cheaper, ideal for covering the home loan specifically alongside our mortgage repayment calculator. Whole-of-life is usually reserved for inheritance-tax planning.
Write it in trust
Putting a policy in trust means the payout goes straight to your beneficiaries rather than through your estate — it's usually faster and can keep the money outside Inheritance Tax. It's typically free to set up when you take out the policy. Don't forget to include any death-in-service benefit from your employer (often two to four times salary) in your existing cover, so you don't over-insure.
Review it as life changes
The right amount of cover moves with your life. A new mortgage, another child or a pay rise pushes it up; paying down the mortgage and children leaving home pull it down. Revisit the figure every few years or after any big change. Pair life cover with income protection — which replaces income if illness stops you working — for fuller protection, and build the premiums into your monthly budget.
Frequently asked questions
How much life insurance do I need?
A common approach is the DIME method: add your debts, the income you'd want to replace (annual income times the years of support), your outstanding mortgage and children's costs, then subtract existing cover and savings. For many families this lands between 5 and 15 times annual income.
What is the DIME method?
DIME stands for Debts, Income, Mortgage and Education. You total these four commitments to size a needs-based amount of life cover, then deduct any policies or savings you already have. It's a quick way to move beyond guessing a round number.
What's the difference between level and decreasing term cover?
Level term pays a fixed lump sum throughout the policy. Decreasing term reduces the payout over time to mirror a repayment mortgage, so it's cheaper and often used to cover the home loan. Level term suits income replacement and family costs that don't fall.
Should I include my work death-in-service benefit?
Yes. Many employers provide death-in-service cover of two to four times salary. Include it in your existing cover figure so you don't buy more than you need — but remember it usually ends if you leave that job, so don't rely on it alone.
Why should life insurance be written in trust?
Writing a policy in trust means the payout goes directly to your chosen beneficiaries, usually faster and outside your estate for Inheritance Tax. It's normally free to arrange when you take out the policy and avoids the money being tied up in probate.