Thinking of life insurance? You should be doing your math then, too. With a few simple “rules of thumb”, and dependent on your age, you can define a solid estimate based on your loved one’s needs in the future and your current financial condition.
Formula 1: The DIME formula.
Might as well get the most detailed one outlined first, right? With the DIME formula (debt, income, mortgage, and education) these four areas are used to calculate your life insurance needs. Here’s how:
- Debt: Add together all your debts, mortgage excluded, and don’t forget to include your funeral cost estimate.
- Income: Decide the length of time your family would need financial help and multiply your current annual income by that number.
Mortgage: Calculate the amount of money needed to pay off your mortgage completely.
- Education: Finally, estimate the cost of sending your child(ren) to college.
Formula 2: Multiple your income by 10.
Simple. Just multiple your annual income by 10. It’s not as detailed of a look at your family’s needs and can be less accurate based on today’s interest rates and economy.
Formula 3: Buy 10x your income, then add $100,000 per child for college expenses.
Same as formula 2, except you add $100,000 for each child you expect to attend college. Again, this formula doesn’t go very deep, but can serve as a decent estimate when you’re shopping for life insurance.
Not a life insurance guru? That’s okay, we’re here to get you covered. Please call us and we can assist you in coming up with the proper amount of life insurance that would provide financial comfort for your family.
The content in this article is for informational purposes only. Life insurance and related guarantees are backed by the claims paying ability of the issuing life insurance company. Customers are required to complete an underwriting process in order to qualify for life insurance. Customers may not qualify for life insurance if the underwriting process yields adverse results.
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