Life insurance is a product that provides peace of mind and financial support after your passing. It is designed to take care of your loved ones when you aren’t able to. Paying a house off, replacing your income and in many other ways can be helpful for your family during the hardest time of their life. Life insurance can be confusing as well as intimidating. Whether it’s finding the right product or figuring out how much of a benefit is needed. These are common reasons people put it off. Unfortunately, it is a product that we are uncertain of when we will use it. The one thing we do know is, we will use it.
A few of the most common ways to calculate the coverage you need are:
- DIME (Debt, Income, Mortgage, Education)
- Debt – add up all debt and recurring bills your family would have to pay (Don’t include mortgages).
- Income – Replace your income annually for as many years they would need to depend on your income.
- Mortgage – Mortgage payoff, this is one of the biggest bills your loved ones will have and without your income, it will be difficult to do.
- Education – Making sure your children have the means to continue their education. College can range in price. Public 4-year colleges currently average $22,000 a year.
- 10X (10 times your annual income)
- Supply your annual income X 10 years.
- 10X+ (10 times your annual income + $100,000 for each child for education)
- Supply your annual income X 10 years plus $100,000 per child for their education. A public 4-year college average cost is currently $22,000 a year.
Other policies to consider for you and your family.
- “Headstart” – program or policy – These are permanent policies designed for children under the age of 18 in most cases. The premium will get locked in at their current age. Being a permanent policy, it will also build a cash value. In many cases the policy owner will come out ahead financially.
- Funeral and Final Expense – These are smaller benefits designed to take care of your funeral and final expense. In most cases these are permanent policies as well. This way you don’t have to worry about it expiring or the cost going up as you get older. Current average funeral is around $13,000 plus plots and markers.