How much life insurance do I need? (DIME method explained)
Most people need life cover equal to their outstanding mortgage, other debts, several years of income for the household, and a lump sum per child — minus any life cover and savings they already have. For a typical UK family with a mortgage and children, that lands somewhere between £300,000 and £600,000, but the only number that actually matters is your own: it depends on your mortgage balance, your income, and how many years your family would need to manage without it.
This guide walks through three ways of working that out, from the thirty-second version to the one advisers actually use. If you just want the answer with your own numbers, the life insurance calculator does the full calculation in under a minute, and nothing you type ever leaves your browser.
Three ways to work out your number
There is no single correct formula, and anyone who tells you otherwise is selling something. There are three methods in common use, and they differ mainly in how much of your actual situation they bother to look at.
| Method | What it does | Good for | Where it fails |
|---|---|---|---|
| Salary multiple | 10–15 × your annual salary | A sanity check in thirty seconds | Ignores your mortgage entirely |
| Salary multiple + children | 10 × salary, plus a set sum per child | Households with young children | Still ignores debt and existing cover |
| DIME | Adds up your four real commitments, subtracts what you have | Almost everyone | Takes five minutes and honest inputs |
Method 1: multiply your salary
The rule of thumb you will hear most often is somewhere between 10 and 15 times your annual salary. It is genuinely useful for one thing: telling you whether you are in the right order of magnitude. If you were vaguely thinking "maybe £50,000?" and you earn £45,000, this method tells you immediately that you are out by a factor of ten.
What it cannot do is account for the thing that usually dominates the answer. Two people on the same £45,000 salary can have completely different needs — one rents and is debt-free, the other has just bought a house with a £250,000 mortgage and two young children. A flat multiple of salary lands somewhere near right for the first and badly short for the second.
Method 2: salary multiple plus a sum per child
A slightly better version adds a fixed amount for each child on top of the salary multiple — commonly 10 × salary plus around £30,000 per child, covering school-age support through to university living costs.
This fixes the most obvious blind spot in method 1, and if you have children and no mortgage it gets close. It still says nothing about debt, and nothing about the cover you may already have through work, which is the number that most often changes the answer.
Method 3: DIME, which is what advisers actually use
DIME is a framework for sizing cover against your real commitments rather than a proxy for them. It is the method this site's calculator implements, and the rest of this guide explains it.
The DIME method, line by line
The letters stand for the four commitments that outlive you.
Debt — everything outside the mortgage: car finance, personal loans, credit cards, overdrafts. These should be cleared immediately rather than pursued against your estate.
Income — the annual after-tax income your household would need replaced, multiplied by the number of years. Ten years is a common choice for families with young children; five is more typical where a partner could realistically re-establish income sooner. This is usually the largest single line, and it is the one worth arguing with yourself about.
Mortgage — your outstanding balance, so the family home is paid off outright rather than the family having to move or sell at the worst possible moment.
Education — a lump sum per child. £30,000 per child is a reasonable UK baseline; private schooling changes the figure considerably.
Add these four together, subtract what you already have, and you are left with the real gap worth insuring.
What to subtract before you land on a final number
This is the step people skip, and skipping it is how you end up over-insured.
- Death-in-service benefit through your employer — typically 2–4× salary. Deduct it, but read the guide to death-in-service cover first, because it disappears the moment you change jobs and for most families with a mortgage it covers only a fraction of the real need.
- Any existing personal life cover you already hold, including mortgage protection sold alongside a home loan.
- Accessible savings — anything realistically available to your family without waiting months to unlock it. Money locked in a pension you cannot draw yet does not count.
Most people are surprised how much bigger the gap is once they actually add this up. A £250,000 mortgage is unremarkable in much of the UK, and most employer death-in-service cover falls well short of that alone.
A worked example
Take a family with two children, a £250,000 mortgage, and a combined income of £45,000. They want ten years of income replaced and £30,000 set aside per child:
| Item | Amount |
|---|---|
| Debt (car finance etc.) | £8,000 |
| Income (£45,000 × 10 years) | £450,000 |
| Mortgage | £250,000 |
| Education (£30,000 × 2 children) | £60,000 |
| Total need | £768,000 |
| Death-in-service benefit | −£90,000 |
| Savings | −£15,000 |
| Real gap | £663,000 |
That is considerably more than "10 times salary" (£450,000) would suggest. The difference comes down to the mortgage and the years of income the family would genuinely need replaced — precisely the two things the salary-multiple shortcut cannot see.
Roughly what different households land on
Every situation is its own, but these are the shapes the calculation tends to take. Use them as a sense check on your own figure, not as a recommendation.
| Situation | Where the number usually lands | What drives it |
|---|---|---|
| Single, renting, no dependants | £0 – £25,000 | Funeral costs only; often no need at all |
| Couple, mortgage, no children | £150,000 – £300,000 | Mortgage balance, minus what a survivor earns |
| Family, mortgage, young children | £400,000 – £700,000 | Income replacement over 10+ years dominates |
| Family, mortgage paid off, teenagers | £150,000 – £350,000 | Education and a few years of income |
| Single parent | £350,000 – £600,000 | No second income to fall back on |
When you need less than the calculator says
A calculator that only ever tells you to buy more is a sales tool. Several situations genuinely reduce the answer, and they are worth checking before you commit to a premium for the next thirty years:
- No one depends on your income. If you are single with no children and no jointly-held debt, the honest answer is often that you need nothing beyond funeral costs. Life insurance replaces income for people who need it; if nobody does, there is nothing to replace.
- Your partner earns enough alone. Income replacement is about the shortfall, not your whole salary. If the household would still function on one income, insure the gap, not the number on your payslip.
- Substantial accessible assets. Savings and investments your family could actually reach do the same job as a payout, and they are already paid for.
- The mortgage is nearly gone. A £30,000 remaining balance is a very different problem from a £250,000 one, and decreasing term cover is the cheaper answer for it.
Level term vs decreasing term
Once you have a target figure, the next decision is the shape of the policy. Level term assurance pays the same fixed sum whenever you die within the term — the right choice for the income-replacement and education portions of your need, since those obligations do not shrink over time. Decreasing term cover falls in value over the term, usually in line with a repayment mortgage, and is cheaper.
A common UK setup is decreasing cover matched to the mortgage, paired with a separate level policy for everything else. The mortgage life insurance guide works through when that split is worth the extra admin.
If you are buying as a couple, there is a second shape decision alongside this one: whether to take a single joint policy or one policy each. It changes how many times the cover pays out, and joint or single life insurance sets out the trade-off.
Choosing the term, not just the amount
The amount is only half the answer. A policy that ends while you still have a mortgage and a teenager at home has failed regardless of how well the sum assured was calculated — and replacing it at that point costs several times what the original did. What happens when your life insurance term ends covers what your options are at that point and how to avoid needing them.
Writing your policy in trust
A detail worth not skipping: writing a life insurance policy in trust — which most UK insurers arrange for free at application — keeps the payout outside your estate for inheritance tax purposes and gets the money to your family faster, without waiting for probate. It is a five-minute form that costs nothing and solves a real problem. The tax guide covers the detail.
How to use the calculator
The calculator runs the DIME calculation automatically, with sensible UK defaults for mortgage, income and education costs already filled in. Adjust the numbers to your own situation — age, mortgage, income, number of children, what you already have — and you will get both a recommended cover amount and an indicative monthly premium. Try the calculator here — it takes under a minute, and nothing is stored or sent anywhere.