How much term life do you need? Both practitioner methods, side by side.

DIME is the industry-standard "needs analysis" formula. The components:

• D — Debt: Non-mortgage debt that would have to be paid off (credit cards, car loans, student loans).
• I — Income: 10× annual gross income. The "10×" multiplier is convention: it approximates 10-15 years of income replacement at a 7-10% withdrawal rate.
• M — Mortgage: Current mortgage balance. Pays off the family home so the survivor has free-and-clear housing.
• E — Education: Per-child college funding target, summed across all dependent children.

DIME tends to overstate coverage need for high earners (the 10× income is often more than they actually need) and understate it for households with long earning horizons (a 35-year-old has 30 years of earnings ahead at growth rates DIME ignores).

The Institute uses DIME as one of two answers. The other is HLV.

Human Life Value calculates the present value of your future earnings, net of self-consumption:

HLV = Σ_{y=1 to Y} [Income × (1+g)^y × (1 − self-cons) / (1+d)^y]

Where g is income growth, d is discount rate, Y is years to retirement, and self-cons is the fraction of income the deceased would have spent on themselves (we default to 30%).

HLV tends to be the larger number for young high earners (decades of compounding income, discounted at a moderate rate, summed). For older earners closer to retirement, DIME usually exceeds HLV.

The defensible practitioner answer is "the larger of DIME and HLV, with the smaller as the floor." If your DIME is $1.5M and HLV is $2.5M, $2M-$2.5M is the right ballpark.

This is one of the few topics in personal finance where the practitioner answer is unambiguous: buy term, invest the difference. The math:

A healthy 35-year-old non-smoker can buy $1M of 20-year term for roughly $35-50/month. The equivalent $1M of whole life (or universal life, or indexed universal life) costs $800-1,200/month. The premium difference is $750-1,150/month, every month, for 20 years.

If you invest that $750-1,150/month at a 7% nominal return in a low-cost index fund, you end up with $400,000-$650,000 of investable assets after 20 years. That's your self-insurance. You no longer need death-benefit coverage because the family has the assets.

The agent's pitch for whole life is "forced savings + tax-deferred growth + permanent coverage." All three are real, all three are overstated:

• Forced savings: If you can't save voluntarily, you have a behavior problem that whole-life premiums won't fix. You'll cancel the policy in year 3.
• Tax-deferred growth: Real, but the internal rate of return on whole-life cash value is typically 2-4%. A taxable index fund earning 7% nominal, even after 15-20% LTCG, dominates.
• Permanent coverage: You don't need permanent coverage once the kids are grown and the mortgage is paid. The whole point of term is to match coverage to need.

The legitimate use cases for whole life are narrow: estate-tax liquidity for HNW estates above the federal exemption (and even then, second-to-die is the structure), business-succession key-person coverage with a buy-sell agreement, and special-needs trust funding. For 95% of households, term is the right answer.

If you need $2M today but only $500K in 20 years (mortgage paid, kids through college, retirement assets built), you don't need a 30-year $2M policy. A ladder is cheaper:

• $500K of 30-year term — covers the long tail (final mortgage years, lingering obligations, replacement of remaining earnings to retirement).
• $700K of 20-year term — layered on top, covers the middle decade.
• $800K of 10-year term — layered on top, covers the first decade when coverage need is highest (young kids, full mortgage, peak earnings deficit).

Total in year 1: $2M coverage. Total in year 11: $1.2M. Total in year 21: $500K. Each layer drops off when no longer needed. The all-in premium is typically 20-30% lower than a single 30-yr $2M policy.

The downside: more paperwork, three medical exams in some cases (most carriers allow stacked policies from one exam), three policies to manage. For most households, the savings justify the complexity.

If you earn $150K and the family spends $150K on the household, the family doesn't actually lose $150K when you die — they lose what was being spent on the household minus what you were consuming yourself. A working adult typically consumes 25-35% of gross income on themselves (food, clothing, transportation, healthcare premiums attributable to them, personal entertainment, discretionary spend).

We default the self-consumption fraction to 30%, which is the SSA / actuarial-society conservative middle. Adjust upward for a high-earning single (closer to 40%); adjust downward for a sole-earner family with dependent spouse (closer to 20%).

This is why HLV is "what the family loses" not "what you earned." It's the right measure for life insurance need.