Life Insurance Needs Calculator

If someone depends on your income — a spouse, children, aging parents — life insurance makes sure they'd be okay without you. It's a hard topic to think about, which is why many busy clinicians put it off. This calculator turns it into a straightforward estimate using the DIME method, a widely used rule of thumb.

What this calculator does

Enter your debts (other than your mortgage), the income you'd want to replace and for how many years, your mortgage balance, the number of children and how much you'd set aside for each child's education, your existing coverage, savings your family could use, and the age of your youngest child. It shows:

• how much additional coverage to consider,
• your total need, and
• a suggested term length.

The chart breaks your need into its four parts.

The formula in plain English

DIME stands for:

• Debt: car loans, private student loans, credit cards — anything your family would have to pay.
• Income: your yearly income × the number of years your family would need it.
• Mortgage: the balance, so your family could stay in the home.
• Education: the amount you'd set aside per child × the number of children.

Total need = D + I + M + E.

Coverage to consider = total need − existing coverage − savings and investments your family could use.

Suggested term = long enough to cover the income years or until your youngest child is about 23, rounded to 10, 15, 20, 25 or 30 years.

Federal student loans are discharged at death, so you can usually leave them out. Private student loans may not be.

A worked example

Jamal is a CRNA earning $180,000. He and his wife have two children; the youngest is 2. They have a $450,000 mortgage, $40,000 in other debts, and want to set aside $120,000 per child for college. He wants to replace his income for 15 years. He has $360,000 of group life insurance through work and about $80,000 in savings.

• Debt: $40,000. Income: $2.7 million. Mortgage: $450,000. Education: $240,000.
• Total need: about $3.43 million.
• After existing coverage and savings, the gap is about $2.99 million.
• A 25-year term would carry the policy until his youngest is in her late 20s.

A healthy 35-year-old can often buy $3 million of 25-year term coverage for a modest monthly premium, especially compared with what's at stake.

Why it matters at each career stage

If you're: Resident / fellow

If you have a partner or children, get term coverage now while you're young and healthy. Premiums are locked for the term, so buying early saves money for decades.

If you're: Employed

Revisit coverage when life changes: a new child, a bigger mortgage, a big raise. Don't rely only on group coverage that ends if you change jobs.

If you're: Practice owner

Owners may need extra coverage for business debts, buy-sell agreements or key person protection. Keep personal and business coverage separate so each does its job.

Adjusting the method for your family

DIME is a starting point. If your spouse earns a good income, you might replace fewer years of your income. If you'd want your family to pay off the mortgage and keep income flowing, keep both. If college savings are already well under way in 529 plans, lower the education amount. The goal is a number your family could live on comfortably, not the largest policy you can afford.

Tips for buying

Ladder if it helps. Two policies — say, a 30-year and a 20-year — can match your needs as they shrink and cost less than one big policy.

Compare quotes. Independent brokers can show prices from many insurers.

Name beneficiaries carefully. For minor children, a trust or custodian is usually better than naming them directly.

Don't forget disability. You're more likely to become disabled than to die during your working years. See the disability insurance calculator.

Planning for little ones? Try the childcare cost calculator, and check your safety net with the emergency fund calculator.