How Much Life Insurance Should I Get?
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How much life insurance do you think you should have?
One good rule of thumb is to add up your long-term debts such as student loans, child care, and house payments and subtract the amount of your assets, NerdWallet suggests.
The difference will be a good indication of how much life insurance you should have.
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Another popular way to determine how much Life Insurance you need is to multiply your income by 10.
A few cautions if you choose to use this method: It does not make you do a detailed review of your long-term financial obligations, nor does it take into account any raises of income you may receive before your death.
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Based on the multiply by 10 method, another model is to Multiply by 10 and add $100,000.
This may add a little more cushion compared to the straight multiply by 10 method, but it still does not let you take a deep look into your long-term financial obligations and may leave your loved ones still short of income.
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One of the most comprehensive methods to determine how much life insurance you need is to use the DIME method.
DIME stands for Debt, Income, Mortgage, and Education.
It is suggested for your Debt that you add up all debt, other than your mortgage, including your funeral arrangements.
Income is defined as deciding how many years your family will need support and multiplying your annual income by the number of years that the family will need to be supported.
You should calculate the amount you need to pay off your mortgage and last you should calculate not only your own student loan obligations but those of your spouse and estimate the cost of your children’s education as well.
Once you have this grand total, you then subtract that from your current assets and the difference is the amount of life insurance you should consider purchasing.
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