How Much Life Insurance Do I Need?
Updated: Aug 4
No one really wants to think about life insurance but if you have loved ones that are financially dependent on you then life insurance isn't something you want to ignore. The funeral costs are typically the smallest bills left behind when someone passes away. It's the mortgage or rent payment, car payment, debt left behind, and day to day expenses that affect your loved ones the most.
How much life insurance is enough? The general "rule of thumb" is to multiply your income by 10, however based on our economy today it has become an outdated rule. You need to take a detailed look into your family's needs, and your savings when deciding how much life insurance coverage you may need.
Take your kid's college expenses into consideration. Education expenses are an important part of your life insurance calculation if you have children. Adding $100,000 per child onto your life insurance policy is a smart idea if you are expecting your kids to attend a college or university at some point in their lives.
The DIME formula. DIME stands for debt, income, mortgage and education, which are four areas that you should consider when calculating your life insurance needs.
Debt: add up your debt and expenses
Income: decide how many years your family would need support and multiply that number by your annual income
Mortgage: Determine the amount you need to pay off your mortgage.
Education: Estimate the cost of sending your kids to college.
This DIME formula is a great set of basic guidelines that will help you get a general idea of how much coverage you will need. There are many tools online that can help you determine how much debt and income replacement is necessary for your policy.
For more information about life insurance please visit https://www.azinsuranceteam.com/life or call us at 480-535-5709.
AZ Insurance Team
*All policies are a little different and this may not be applicable to your insurance policy, talk to your agent to see what your policy covers.*