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Life insurance: How much do you need?



None of us like to think about it, but our eventual demise from the earth is 100% guaranteed. The question you need to ask yourself is this: What kind of financial footing do you want to leave for your family and loved ones? Your passing away is hard enough, without thinking about how the bills are going to be paid. What is your life worth? What is the well being of those you leave behind worth? It is sad but true, that many a family is affected by the death of a breadwinner without proper life insurance coverage.

A common step to determining life insurance coverage is using the D.I.M.E. acronym.

D. Death
I. Income
M. Mortgage
E. Education

Death: How much will it cost to put you in the ground or be cremated? Depending on how extravagant you want your passing over to the other side to be, will determine this number. Figure $6000 on the low side and $25,000 on the higher side.

Income: Figure how many years of your income you would like to replace. Multiply your annual income by 10, and this will give you a good number to go by. Think about the other spouse. Will they have to start paying for childcare?

Mortgage: You cannot forecast when you are going to pass away, so pick a number closest to your current balance. Also, factor in your debt load including credit cards, auto loans, student loans, etc.

Education: Do you wish to pay for the education of your children? Just think of the difference this could make in the future of your little ones. Another item to factor in is the education expense of a stay at home spouse. Will they need education going forward in their lives?

This is a great method for coming up with a face amount of a life insurance policy. Good advice is to get the face amount you need at a price you can afford. If a 10 year term policy is all you can easily afford, that is a good policy for you! Find a life insurance company with an A+ rating through AM Best to make sure that they have the financial stability to be around for another 10-30 years. When buying a term policy, make sure you can convert it to permanent policy in the future.

Life insurance is important. Don’t be caught dead without it.


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