Use the DIME formula to help you determine the amount of life insurance your loved ones are going to need.
When it comes to life insurance, the best you can do for how much you’re going to need is by making an educated guess. This doesn’t mean thinking about it for 4 seconds, and then shouting any old number that sounds “right.” It’s going to take some sitting down, a pen and a piece of paper for this educated guess to be truly educated. The DIME formula is something that you may or may not have heard of, and could be the most important formula you have ever used since the Pythagorean theorem. Learn what the DIME formula consists of, and how it can help you determine the amount of life insurance that you require.
The DIME Formula
DIME is an acronym that stands for Debt, Income, Mortgage, and Education. These four areas are things you should consider when thinking about the amount of life insurance you should purchase.
· Debt: Add up all your debts (other than your mortgage), and the costs for funeral expenses.
· Income: Your annual income should be multiplied by the amount of years you want your family to be supported by the policy’s lump sum. This number should be the number of years until your youngest child graduates from high school, at least.
· Mortgage: Simply figure out how much you have left on your mortgage.
· Education: With the cost of university increasing every year, and no end in sight, sending your kids to college and giving them nothing to worry about is something you should strongly consider.
Adding all of these up and subtracting your life’s saving from it should give you a very close estimate to what you will need. For more information on how you can get the correct amount of life insurance coverage for your family, contact the Bristol team at CV Mason Insurance Agency.