How Much Life Insurance Do You Need?

A happy family protected by life insurance.

How Much Life Insurance Do You Need?

How Much Life Insurance Do You Need?

We all want to ensure that our families are taken care of after we’re gone, which is why planning and having a life insurance policy in place is so important. But how much coverage do you actually need?  Life insurance policies vary in type, length, benefits and are as unique as your individual family. Your ideal amount of coverage will depend on your existing resources, outstanding debts, and a wide range of other factors. Here are a few tried-and-true ways to decide how much life insurance you should purchase.

Life Insurance Calculators

Many financial institutions have made it easy for you to determine your ideal coverage amount by creating life insurance calculators. You’ll be asked some basic questions about your dependents, debts, assets, savings plans for the future, and more. You can find these tools through resources like Forbes Life Insurance Calculator and Bankrate.  While these calculators can give you a broad idea of the coverages and amounts you need, having an independant agent on your side to walk you through the process is what we are here for.  We’ll make sure you understand your policy from cover to cover.

Income-Based Life Insurance

If you want to manually determine how much coverage to get, one quick method is to multiply your income by 10. So, if your annual salary is $50,000, this method would indicate that you should have at least $500,000 in life insurance.

This method provides a good starting place, but it isn’t foolproof. It doesn’t account for any of your existing assets or consider your family’s unique needs. A similar method that provides a bit more “wiggle room” is multiplying your income by 10 and adding an additional $100,000 for each child’s college expenses.

The DIME Formula

If you’re looking for something a bit more customized. The DIME Formula is ideal here. The DIME Formula takes four major financial figures into account: Debt, Income, Mortgage, and Education.

Start by totaling all of your debts (except for your mortgage) as well as an estimate of your funeral expenses. Then, determine how many years your family would need support after your passing. Multiply that number by your annual income. Next, find out how much money it would take to pay off your mortgage. Lastly, estimate how much you’ll need to set aside to pay for your kids’ higher education.

This method is much more thorough at calculating your ideal amount of coverage than simply looking at your current income. However, the DIME formula still doesn’t account for any existing assets or any contributions that a stay-at-home parent makes.

Securing Life Insurance in Pawleys Island

Purchasing a life insurance plan is a big step in keeping your family financially secure for years or even decades to come. Thankfully, deciding on the right plan isn’t something you have to do alone. If you’re looking for Pawleys Island insurance agents, come speak with an agent at Laura Hibbits Insurance.  Not only can we discuss life insurance, term life insurance and other life insurance options, but we also can make sure the other areas of your life are protected by your home, auto and business insurance policies.

Laura Hibbits and her team have a combined 200 years of experience in insurance, so you know you’re working with the best of the best. We’ll stop at nothing to find the best plan for you and your loved ones, all at a rate that works for you. Contact us today to learn more.

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