myUSFinance

1. Enter your Total Debts ($) — This value represents your total debts
2. Enter your Annual Income ($) — This value represents your annual income
3. Enter your Years of Income Replacement — This value represents your years of income replacement
4. Enter your Future Expenses ($) — This value represents your future expenses
5. Enter your Current Savings ($) — This value represents your current savings
6. Click Calculate — Review your results in the output section below the form. The calculator instantly computes all values based on your inputs.
7. Adjust and Compare — Modify any input to see how changes affect the result. Try different scenarios to find the optimal approach for your situation.

All calculations are performed instantly in your browser. Your data is never sent to any server or stored anywhere — your financial information remains completely private.

Where:

• Debt — All outstanding debts excluding mortgage (credit cards, auto loans, student loans)
• Income — Annual income to replace multiplied by the number of years dependents need support
• Mortgage — Remaining mortgage balance to be paid off
• Education — Estimated education costs for each child

Worked Example

Debts: $25,000. Annual income: $80,000 × 15 years = $1,200,000. Mortgage: $250,000. Education: 2 kids × $100,000 = $200,000. Total need: $1,675,000. Minus existing assets ($200,000): Coverage needed = $1,475,000. Round to $1,500,000.

Limitations and Assumptions

The DIME method provides a straightforward starting point. More sophisticated analyses consider inflation, investment returns on the death benefit, Social Security survivor benefits, and changing needs over time. Term life insurance is typically the most cost-effective option for most families, with 20-30 year terms covering the period when dependents need protection most.

Understanding the following key concepts will help you interpret your results and make better financial decisions:

• Principal — The initial amount of money involved in the calculation, whether it is a starting balance, loan amount, or investment.
• Interest Rate — The percentage charged or earned on the principal amount, typically expressed as an annual rate (APR). This rate determines how quickly your money grows or how much borrowing costs.
• Compounding — The process of earning interest on previously earned interest. More frequent compounding (daily vs. monthly vs. annually) results in higher effective returns or costs.
• Time Horizon — The length of time over which the calculation applies. Longer time horizons amplify the effects of compounding and small differences in rates.
• Present Value vs. Future Value — Present value is what money is worth today; future value is what it will be worth at a specific point in the future, accounting for growth or inflation.

These concepts form the foundation of virtually all financial calculations. Understanding how they interact helps you evaluate any financial product or decision with confidence.

Let's compare insurance options for a practical scenario.

Scenario: The Johnson family is reviewing their insurance coverage. They want to understand the cost implications of different coverage levels and deductibles.

Option A — Lower Deductible: $500 deductible with a $2,400 annual premium. If they file one claim of $3,000 during the year, their out-of-pocket cost is $500 + $2,400 = $2,900.

Option B — Higher Deductible: $1,500 deductible with a $1,800 annual premium. With the same $3,000 claim, their out-of-pocket cost is $1,500 + $1,800 = $3,300.

In a year with a claim, Option A saves $400. But in a year without claims, Option B saves $600 in premiums. Since most families file claims infrequently, Option B often results in lower total costs over time. Over five years with one claim, Option B saves $2,000 net ($600 × 5 years - $400 claim difference = $2,600 savings).

The optimal deductible depends on your emergency fund and risk tolerance. This calculator helps you model these scenarios with your specific numbers.

1. Review Coverage Annually

Your insurance needs change as your life changes. Marriage, children, home purchases, and career changes all warrant a coverage review. An annual check ensures you are neither underinsured nor overpaying.

2. Bundle Policies for Discounts

Most insurers offer 10-25% discounts when you bundle multiple policies (auto + home, for example). Even if individual policies are slightly cheaper elsewhere, bundling often provides the best total value.

3. Choose Higher Deductibles When Possible

If you have a solid emergency fund, opting for higher deductibles significantly reduces premiums. The savings over time usually exceed the additional out-of-pocket risk.

4. Maintain Good Credit

In most states, insurers use credit-based insurance scores to set premiums. Good credit can reduce insurance costs by 20-40% compared to poor credit, regardless of your claims history.

5. Ask About All Available Discounts

Many discounts go unclaimed because policyholders do not know to ask. Common discounts include good student, multi-car, safety feature, low mileage, and professional organization discounts.