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 | A multiple of gross annual income, plus an education component per child | Brokers and personal-finance publishers. We have not read those publications, so this page states neither the multiple nor the per-child figure. |
| 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, with an education component per child added by some publishers. The multiple and the per-child figure are published by brokers and personal-finance publishers. We have not read those publications, so this page states neither, and works no example on them.
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 multiple is not derived from a published calculation, and publishers do not state a basis for selecting a point within the range they give.
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 component is commonly taken from the College Board’s Trends in College Pricing and Student Aid 2025, published November 2025. For 2025-26 that College Board 2025 edition gives average published tuition and fees for full-time in-state students at public four-year institutions as $11,950, up $340 on 2024-25, and the average total student budget for in-state students at those institutions — tuition and fees plus housing, food, books and other expenses — as $30,990. State averages for published tuition and fees in the same College Board 2025 edition range from $6,360 in Florida to $18,090 in Vermont. These are annual figures as the College Board publishes them; a multi-year total is arithmetic on them, not a College Board figure.
Worked calculation
Working DIME needs four inputs the household supplies and one — the education figure — that a publisher supplies. We could not read the publication that supplies it, so this page works no example. The arithmetic itself is a sum:
| Component | Input |
|---|---|
| Debt | The household’s non-mortgage debt balances |
| Income | The household’s annual income × the number of years of replacement chosen |
| Mortgage | The outstanding mortgage principal |
| Education | The projected education cost per child, × the number of children |
| DIME total | The four lines added together |
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 generally terminates on leaving employment.
What a policy costs
We found no independent published source for life insurance premiums as of September 2026. The rate tables that exist are published by insurers and by sites paid to refer customers to them, so this page states no premium. What determines a quoted rate is set out below.
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, and carriers publish price breaks at their own band thresholds.
A fully underwritten term policy may include a paramedical exam; accelerated-underwriting programmes issue without one for applicants within the age and face-amount limits the carrier publishes. Carrier service standards and underwriting timetables are published by the carriers themselves; we found no named, dated, independent publisher stating them as of September 2026, so no figure is stated here. See Life Insurance Medical Exam and No-Medical-Exam Life Insurance.
Tax treatment of the death benefit
Under IRC §101(a)(1) the death benefit is excluded from the beneficiary’s gross income except as provided in §101(a)(2) and (a)(3), (d), (f) and (j): where the contract was transferred for valuable consideration, §101(a)(2) limits the exclusion to that consideration plus the premiums the transferee later paid; where the insurer pays the proceeds later than death, §101(d) prorates the excluded amount over the payment period and includes the remainder in gross income. Three further documented points:
- Interest is included. Where proceeds are held by the insurer and paid with interest, the interest element is includable in gross income (IRC §101(c)–(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:
- A large number of US adults report being uninsured or underinsured.
- A share of households report a coverage gap relative to their stated need, and a share of US adults report owning life insurance.
- Respondents in the youngest age band overestimated the cost of term coverage against the market rate.
These are survey findings published by LIMRA, an industry research body funded by the insurers it reports on. We have not read the study, so this page states none of its figures; it records only what the study addresses.
What the record shows
Two formulas are in general publication. The income multiple applies a multiple to annual income and adds a per-child education figure; DIME sums debt, income replacement, mortgage balance and education cost. DIME produces the larger figure for any household carrying a mortgage or education cost, because the multiple omits both. Neither formula subtracts existing coverage or survivor benefits unless the user does so. The multiple, the per-child figure and the education cost each come from a publication we have not read, so this page states none of them and works no example. No premium appears on this page either: no independent publisher reports one.
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).