LifePolicyFactsRules like "buy ten times your salary" are easy to remember but often wrong. A better approach adds up what your family would actually need if your income stopped, then subtracts what they already have.
Why a number matters
Too little cover leaves a gap your family must fill with savings, debt or a lower standard of living. Too much cover wastes premium money. A calculated figure helps you buy the right amount.
The DIME method
DIME stands for Debt, Income, Mortgage and Education. Add each part, then adjust.
| Part | What to include |
|---|---|
| Debt | Credit cards, car loans, personal loans, funeral costs |
| Income | Years of income your family would need to replace |
| Mortgage | Remaining balance, or the rent you would need instead |
| Education | Expected school or university costs for each child |
Worked example
Sam is 35, earns 60,000 a year and has two young children. Debts and final costs come to 20,000. Replacing income for 10 years is 600,000. The remaining mortgage is 180,000. Education for two children is estimated at 80,000. The total is 880,000.
What to subtract
Subtract existing savings, investments and any life cover you already have, including cover through work. If Sam has 50,000 in savings and 100,000 of workplace cover, the gap falls to 730,000. Remember that workplace cover usually ends if you leave the job, so see whether workplace life insurance is enough.
Also think about a partner who does unpaid care work. The cost of replacing childcare and household work is real; read about stay-at-home parents.
When to review your cover
Review after a marriage, a new child, a new mortgage, a big pay change, or when debts are cleared. Many people do a quick check every year or two. Inflation also erodes a fixed payout, which the inflation guide explains.
Frequently asked questions
Is ten times salary a good rule?
It is a rough starting point. It ignores your debts, children and existing savings, so a calculation is more reliable.
How many years of income should I replace?
It depends on your children's ages and your partner's earnings. Many people use the years until the youngest child is independent.
Should I include my partner?
Yes, if your partner contributes income or unpaid care. Each adult should have their own calculation.
Educational content only. Not insurance, financial or legal advice. Figures are illustrations; check real quotes and policy documents.