Life insurance is rarely the topic of choice for casual conversation. It forces us to confront uncomfortable possibilities, and frankly, it can feel overwhelming. However, it is one of the foundational blocks of a sound financial plan. A common question we encounter is not just "Do I need it?" but "How much do I actually need?"

To bring some clarity to that calculation, we often use the acronym DIMEL. It provides a structured way to look at your financial life and ensure that if the unexpected happens, the people you care about are not left scrambling.

Here is how to break it down.

D - Debts

The first step is looking at consumer liabilities. This includes credit card balances, personal loans, car notes, and any other outstanding debts that are not your mortgage. When an individual passes away, their estate is often responsible for these obligations. The goal here is to ensure there is enough liquidity to clear the slate immediately, so your family isn't burdened with monthly payments on top of everything else.

I - Income Replacement

This is often the largest number in the calculation. If your household relies on your income to maintain its standard of living, that income needs to be replaced. This isn't just about keeping the lights on next month; it is about maintaining stability for years to come. You need to consider how many years of salary your family would need to bridge the gap until other financial resources or life stages kick in.

M - Mortgage

For many families, the home is their most significant asset and their largest liability. A well-structured life insurance plan should typically account for the remaining balance of the mortgage. This allows the surviving spouse or family members to remain in the family home without the pressure of a monthly mortgage payment. It provides immediate housing security during a turbulent time.

E - Education

If you have children, or plan to, education costs are a major future liability. Whether it is private school tuition or funding a four-year university degree, these costs continue to rise. Allocating a portion of your coverage specifically for education ensures that your children’s academic future is funded, regardless of your physical presence.

L - Legacy

The final piece is less about covering bills and more about what you want to leave behind. This could be an inheritance for your children to give them a head start, a charitable contribution to an organization you support, or simply a financial cushion to ensure your spouse lives comfortably in retirement. "Legacy" is the surplus that goes beyond mere survival. Legacy here can be considered optional but you are going to want to keep in mind that the death benefit of life insurance is a way to transfer wealth tax free.

Why Look Beyond Your Employer

Many college-educated professionals have some form of group life insurance through their workplace. While this is a nice benefit, relying on it exclusively can be a mistake.

Employer-sponsored plans are often "one-size-fits-all." They typically offer coverage as a multiple of your salary (e.g., 1x or 2x base pay), which may fall significantly short of the DIMEL calculation we just reviewed.

More importantly, employer policies are rarely portable. If you change jobs, are laid off, or retire, that coverage usually ends. By the time you lose that coverage, you are older, and purchasing a private policy then will be significantly more expensive—or potentially impossible if your health has changed.

Exploring private policies outside of your employer gives you control. It allows you to lock in insurability while you are healthy, select a term or structure that matches your specific timeline, and access a wider range of riders and options that generic group policies simply do not offer. It turns your coverage into a personal asset rather than a temporary employment perk.

Summary

Using the DIMEL framework helps move the conversation from abstract anxiety to concrete numbers. It allows you to see exactly what you are protecting and why. If you haven't reviewed your coverage recently, or if you are relying strictly on what your benefits handbook says, it might be time to take a closer look.

Westminster Wealth Management is a Registered Investment Advisor. The information presented here is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.