In this life, a few things are for sure. While your living life and setting up yourself for the future, you have to think about after. This means taking care of your family if you become seriously injured or die. The best way to protect your family is with life insurance. If your looking at life insurance and don’t know how much you need we’re here to help you use the DIME method.
Meaning of DIME
DIME stands for debts, annual income, mortgage balance, and estimated future education cost. These four components are used to calculate how much life insurance you need to protect your family in case a tragedy occurs. In this calculation, you also must consider childcare costs, funeral costs, the cost to take care of aging parents, and other financial obligations.
How to Calculate Insurance Needs Using DIME
Step one, you need to account for all your debts. Debt is a financial obligation to pay a creditor back for money that you loaned or borrowed. This calculation should include credit cards, automobile loans, personal loans, and any other secured and unsecured debts. Your mortgage is included in this number if you do not have adequate mortgage insurance protection as well.
Income is always counted as how much you earn annually. You should multiply that number by the number of years you believe your dependents will need to live off the funds. Additionally, you must consider education costs for your children in this number. You can compare in-state tuition prices and add 8% inflation to the cost for each year. If you have a college savings plan, you may be able to deduct that number from your insurance needs.
When calculating your insurance needs via the DIME Method, be sure to tailor the calculations to your individual needs. You may need more coverage for education if your children plan on going to school out of state or may need less if your home is already paid off. After getting your calculations, cover your family and rest easy knowing they will be taken care of in the future.