Are you wanting to protect your loved ones after you die?
Taking out life insurance is a great way to ensure their finances are cared for after you pass on. But life insurance plans aren’t all the same. Some last for only a short period of time, while others last your whole life. Some provide you with a lot of coverage, while others will give out a smaller amount.
Knowing how much life-insurance you need is crucial. If you don’t, you might end up paying more than you need to on a policy that doesn’t provide the right benefits. Keep reading to learn about how to tell how much life insurance you need!
How Much Life-Insurance You Need: Multiply Your Income By 10
Your life insurance policy will need to help your family continue their lifestyle after you’re gone. This includes being able to afford practical things, like paying off a mortgage.
A good rule of thumb is to multiply your income by 10 and look for a plan that offers at least that much money. That way, they will get 10 years’ worth of your income when you pass. This minimizes their risk of suffering a huge financial loss.
Add $100,000 Per Child
How much life-insurance you need will depend on the number of children you have. If you still have kids who are going through schooling, you’ll want to leave them enough money to pay for their education.
Many people buy a plan that leaves at least $100,000 to each child for their schooling costs. This might not cover all your child’s expenses, depending on what type of schooling they choose to pursue. Still, it’s a good starting number if you don’t know what your child will study.
Take Advantage of the DIME Formula
The above pieces of advice are great guidelines for people who don’t know how much life-insurance they need. If you want to review your situation in a more careful manner, use the DIME formula.
DIME stands for four aspects of your family’s finances: 1. Debt and expenses, 2. Income, 3. Mortgage, and 4. Education. Sit down with your family and determine how much they need in each category.
If you need to, hire an accountant to help you review your family’s current finances. Determine how long it will take them to recover financially if they lost your income. Then, use this information to help you choose the best life insurance policy for you.
Don’t Buy Less Than You Need
If you’re unsure of how much you need, it’s always better to buy more. Buying a life insurance plan with a lower payout than your family needs will end up hurting them in the long run, even if it saves money now.
So, when in doubt, you should look for the life insurance policy that offers the most coverage for the lowest premium.
Want to pass your assets on to your beneficiaries? Check out the Paradigm MEC plan.
Want to Learn More?
Now that you know how much life-insurance you need, you’re ready to start looking for plans.
Make sure you research life insurance agencies in a careful manner. You want to buy a plan known for its robust coverage. The company should also have great customer service. Look at reviews to see what other customers thought of the plan you’re considering.
Want more articles like this? Check out the rest of this website today!