How much Life Insurance do you really need?
There is a view that when some persons hear “Life Insurance,” they may tend to think, “What does it have to do with me?”, or “That sounds complicated!”.
While there’s no one-size-fits-all solution, the truth is, becoming insured is simpler than you think.
Say this with me…. DIME.
DIME is a simple acronym for Debt, Income, Mortgage, Education. It is the easiest, tried and true approach to estimating what your coverage should be.
Let’s break this simple calculation method down together!
- D – Debt: Add up all your debts (except your mortgage).
- I – Income: How many years would your family need your income to stay financially stable? Multiply your annual salary by the number of years for which they would require it, then add this amount to your total debt.
- M – Mortgage: Keep the roof over their heads (include the balance on your mortgage)
- E – Education: School fees for the young ones (put that in too)
Now picture this: Imagine you’re 35, married with one child. You’re earning $60,000 annually, have a mortgage balance of $250,000, plus a credit card and a car loan totalling $50,000.
We’ll use DIME and see how it works:
- Debt: Car loan + credit card = $50,000
- Income: 5 years of income ($60,000 x 5) = $300,000
- Mortgage: Remaining balance = $250,000
- Education: Estimated future costs = $120,000
Total = $720,000
With Term to 100, it is possible to secure a policy of around $720,000, with a monthly premium as low as $469, which is a great start!
Now do note this is a simple example, and the rule applied isn’t the only means of assessing your life insurance needs. But here’s the important part: you don’t need the “perfect” amount right away. Even a smaller policy can still make a huge difference where it matters, AND you can always increase your coverage later as your circumstances evolve!
Bottom line? Save yourself some time, Use DIME, and take the first steps to securing your own and your family’s tomorrow, today!