❤️ Life Insurance
💡 Ideas
How to Calculate Debt to Determine How Much Life Insurance You Need
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Scott Karstens
Founder & CEO · Licensed since 2001
Published May 20, 2026
⏱️ 1 min read
As we discussed in previous articles on this same topic, the rule of thumb you need to follow when calculating how much life insurance you need is to use the DIME method — Debts, Income, Mortgage, Education. Today we focus on the “D” — Debts.
What Counts as “Debt” in the DIME Method?
The “D” in DIME covers all outstanding debts except your mortgage (which has its own separate “M” component). This typically includes:
- Credit card balances — all outstanding balances across all cards
- Auto loans — the remaining balance on any vehicle loans
- Student loans — private and federal student loan balances
- Personal loans — any unsecured personal debt
- Medical debt — any outstanding medical bills
- Business debt — personally guaranteed business loans
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Don’t Forget Cosigned Debt
If a parent or spouse has cosigned any of your loans, they remain responsible after your death. Always include cosigned debt in your calculation — even if it’s technically ‘theirs’.
Step-by-Step Debt Calculation
Here’s how the DIME worked example handles the Debt component:
- Credit card debt: $35,000
- Auto loan remaining balance: $32,000
- Student loans: $23,000
- Total D Component: $100,000
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List Every Debt, Then Add Them Up
The most common mistake is forgetting smaller debts. Go through every financial account and list every outstanding balance. Being thorough here ensures your family won’t be left with surprise obligations.
Subtract Existing Assets That Can Cover Debt
In the full DIME Needs Analysis, you can subtract liquid assets from your total need — things like savings accounts, investment accounts, or other assets that could easily be sold to pay off debt. This gives you a net coverage need that accounts for what your family already has.
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Use Our DIME Tool for a Complete Picture
Our DIME Needs Analysis walks you through all four components — Debts, Income, Mortgage, and Education — and lets you deduct existing assets. You get a complete, precise recommendation in minutes.
Questions? Email us at info@quote-bot.com
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