Calculating life insurance needs is often complicated and stressful for a family or individual. The question most people ask is, ‘How much life insurance do I need?’ It is an important question to ask but equally difficult to answer. There are things you can do to help you get a better idea of how much coverage you need.
There are several ways to generalize how much life insurance you need. You may have read about ways to estimate your coverage needs. The simplest method is multiplying your income by 10. Another common method is the DIME (debt, income, mortgage, and education) formula. DIME is a little more detailed. You add up all the elements of the acronym to reach an estimate. These are good tools for quickly calculating life insurance needs. They are not perfect, though, as they don’t take into consideration stay-at-home parents, current savings, and coverage you already have.
You can calculate how much life insurance you need by first determining how much money would be required to take care of your loved ones when you’re gone. For stay-at-home parents, that includes a cost estimate to have someone care for their children. Then add your large financial obligations and debts like a mortgage, future college tuition, funeral expenses, etc. Once you have all those items added up, you can subtract any assets and savings. That final number is a very rough estimate of the coverage you need.
No matter how you calculate your life insurance coverage needs, you should seek help from an expert. Having an estimate in mind can help you understand where you may need to start. An independent insurance agent can help you determine if your calculations are correct if you’ve missed anything, and advise you on options you may not have known about.
At Domain Insurance, our goal is to make your insurance experience easy to understand. From life insurance to boat insurance, we are here to help. We add a personal touch to the often-impersonal world of insurance. Contact us or call (239) 610-1116 to ensure peace of mind for you and your family.