Educational guide — not financial or insurance advice. Premiums vary by age, health, state, and carrier. Figures below are the published formulas and dated reference quotes, not a calculation for any individual.
The two published formulas
Neither formula is a legal or regulatory standard. Both are rules of thumb published by insurers, brokers and personal-finance publishers, and each is stated here as its publisher states it.
| Formula | As published | Published by |
|---|---|---|
| Income multiple | 10–15 × annual income, plus about $100,000 per child for education | Widely published by brokers and personal-finance publishers, including Policygenius (the per-child education figure) and NerdWallet |
| DIME | Debt + Income replacement + Mortgage + Education, summed | Published across the broker and personal-finance sector; no single originating publisher is identified in the sources reviewed |
The income-multiple rule, as published
The rule is stated as a multiple of gross annual income, most often in the range 10× to 15×, with an education component of approximately $100,000 per child added by some publishers.
Worked at documented inputs:
| Annual income | 10× | 15× | Plus 2 children at $100,000 |
|---|---|---|---|
| $50,000 | $500,000 | $750,000 | $700,000 – $950,000 |
| $75,000 | $750,000 | $1,125,000 | $950,000 – $1,325,000 |
| $100,000 | $1,000,000 | $1,500,000 | $1,200,000 – $1,700,000 |
What the publishers state it excludes. The multiple is applied to income alone. It does not take account of outstanding mortgage balance, non-mortgage debt, existing coverage, liquid savings, or a surviving spouse’s own income or pension. The range itself — 10 to 15 — is not derived from a published calculation, and publishers do not state a basis for selecting a point within it.
The DIME method, as published
DIME is an additive formula over four components:
| Letter | Component | As published |
|---|---|---|
| D | Debt | Non-mortgage debt balances: credit cards, car loans, co-signed obligations |
| I | Income | Annual income × the number of years of replacement chosen |
| M | Mortgage | Outstanding mortgage principal |
| E | Education | Projected education cost per child |
The education figure commonly used is the College Board’s published cost of four years of in-state public college. The College Board’s Trends in College Pricing 2024 figures put four years of in-state public tuition, fees, housing and food at roughly $109,000 in 2024 dollars.
Worked calculation
A household with $75,000 of annual income, $15,000 of non-mortgage debt, a $250,000 mortgage balance, two children, and 15 years of income replacement selected:
| Component | Figure |
|---|---|
| Debt | $15,000 |
| Income ($75,000 × 15) | $1,125,000 |
| Mortgage | $250,000 |
| Education ($109,000 × 2) | $218,000 |
| DIME total | $1,608,000 |
| Income multiple at 10× / 15×, for comparison | $750,000 / $1,125,000 |
What the formula’s publishers state it excludes. DIME does not subtract existing coverage, liquid savings, a surviving spouse’s income, or Social Security survivor benefits, and it does not discount future income to present value. Publishers who address the point state that existing employer-provided coverage may be subtracted, and note that group coverage is commonly 1–2× salary and generally terminates on leaving employment.
Published reference premiums
Premiums are set by the carrier and vary by age, health class, state, tobacco use, term length and coverage amount. The figures below are published reference quotes for a healthy 35-year-old non-smoker at $500,000 of coverage, mid-2025 — illustrative, not a quotation.
| Product | Published monthly premium range |
|---|---|
| 20-year level term | $25–$30 |
| 30-year level term | $35–$50 |
| Whole life (cash value) | $450–$700+ |
At these published figures, whole life coverage of the same face amount is roughly 15–20× the cost of 20-year term. The attribute-by-attribute differences between the two — term length, renewal, cash value, guaranteed premium, underwriting — are set out in Term vs. Whole Life Insurance.
Where an applicant does not clear underwriting for term coverage, final expense insurance is the small permanent product carriers issue instead; its documented terms are in Do You Need Final Expense Insurance? What the Policies Say.
What determines a quoted rate
Carriers publish the rating factors they apply:
- Age at issue — rates are banded by age and rise at each band.
- Health class — assigned from the application, medical records, prescription history, and where required a paramedical exam.
- Tobacco use — a separate rate class in every carrier’s published schedule.
- State — rates are filed with each state’s insurance department and differ between states.
- Term length and face amount — longer terms and larger face amounts carry different per-thousand rates; several carriers publish price breaks at band thresholds such as $250,000, $500,000 and $1,000,000.
Underwriting for a fully underwritten term policy commonly takes four to six weeks and may include a paramedical exam; accelerated-underwriting programmes issue without an exam for applicants within published age and face-amount limits. See Life Insurance Medical Exam and No-Medical-Exam Life Insurance.
Tax treatment of the death benefit
Under IRC §101(a)(1), amounts received under a life insurance contract paid by reason of the death of the insured are excluded from the beneficiary’s gross income. Three documented qualifications:
- Interest is included. Where proceeds are held by the insurer and paid with interest, the interest element is includable in gross income (IRC §101©–(d)).
- Estate inclusion. Where the decedent held incidents of ownership in the policy at death, the death benefit is included in the gross estate under IRC §2042. The federal basic exclusion amount is $15,000,000 per decedent for deaths in 2026 (IRS, What’s New — Estate and Gift Tax, verified 2026-08-15). State estate-tax thresholds are lower — see Estate Tax vs. Inheritance Tax.
- Transfer for value. Where a policy was transferred for valuable consideration, IRC §101(a)(2) limits the exclusion to the consideration paid plus subsequent premiums, subject to the statutory exceptions.
The full treatment is documented in Is Life Insurance Taxable to the Beneficiary?.
What the industry research reports
LIMRA publishes an annual Insurance Barometer Study. Its 2025 edition reports:
- Approximately 100 million US adults report being uninsured or underinsured.
- 40% of households report a coverage gap relative to their stated need.
- 51% of US adults aged 18–75 report owning life insurance.
- Respondents aged 18–30 overestimated the cost of a $250,000 20-year term policy by a factor of 10 to 12 against the actual market rate.
These are survey findings published by an industry research body, reported here as published.
What the record shows
Two formulas are in general publication. The income multiple applies a factor of 10–15 to annual income and adds a per-child education figure; DIME sums debt, income replacement, mortgage balance and education cost. Applied to the same household, DIME produced $1,608,000 against the income multiple’s $750,000–$1,125,000 in the worked example above — a difference driven by the mortgage and education components the multiple omits. Neither formula subtracts existing coverage or survivor benefits unless the user does so. Published reference premiums for a healthy 35-year-old at $500,000 of coverage were $25–$50 per month for level term and $450–$700+ for whole life in mid-2025; the actual rate is set by the carrier from the rating factors listed above.
Related reading
- Do You Need Final Expense Insurance? What the Policies Say
- Term vs. Whole Life Insurance
- Is Life Insurance Taxable to the Beneficiary?
- How Much Life Insurance Do I Need for a Mortgage?
- What Is Estate Planning? The Documents and What Each Does
- How Much Does a Funeral Cost?
- Estate Planning Checklist: Everything in One Place
Educational information only — not financial, tax, or insurance advice. Premiums and rules change. Confirm current figures with a licensed insurance agent and a tax professional. Sources: LIMRA 2025 Insurance Barometer Study; IRC §§101, 2042; IRS, What’s New — Estate and Gift Tax (verified 2026-08-15); College Board, Trends in College Pricing 2024; published income-multiple and DIME formulations (Policygenius, NerdWallet).