Although discussing life insurance may sound morbid, providing it to your family members in the event of your untimely passing is one of the greatest gifts that you can leave. You’ll want to ensure that you have enough life insurance to cover your obligations such as student loan debt, outstanding mortgage, college fund aspirations, and retirement so that your loved ones have extra peace of mind.
When it comes to determining how much life insurance you need, there are generally three schools of thought. First, manually calculate your life insurance by adding together your salary (times the number of years you want to duplicate that income), your mortgage balance, additional debts, future obligations (college expenses), and the cost to replace any services that a stay at home parent offers (child care). Once done, subtract your liquid assets to include savings, retirement accounts, other life insurance policies, and college funds. The final number is how much life insurance you need.
The second method is to simply multiply your income by 10 and add an additional $100,000 to that figure for every child to pay for college costs. While this method is simple, it fails to take into account outstanding debts and the likelihood that your income may increase substantially as you move into higher-paying roles.
The third method is to use the DIME formula which stands for debt, income, mortgage, and education. By adding all these figures together you’ll have a holistic view of your long-term financial needs.
At D&B Insurance Solutions in Dallas, TX our friendly team of insurance professionals is expertly trained and ready to assist in any life insurance questions. Whether you live in Dallas, TX, or a neighboring community, give D&B Insurance Solutions a call to schedule a no-obligation consultation.