Finding Your Coverage Number
Calculating the right amount of life insurance is critical. Here are three proven methods.
Method 1: The Income Replacement Method
Annual Income x Years of Support = Coverage Needed
Example: $75,000 x 18 years = $1,350,000
Method 2: The DIME Method
- D — Debt: Total of all debts except mortgage
- I — Income: Annual income multiplied by years needed
- M — Mortgage: Outstanding balance
- E — Education: Estimated college costs
Example: $30K + $1.2M + $250K + $120K = $1,600,000
Method 3: Human Life Value Approach
Calculates present value of your future earnings considering age, projected retirement, income growth, and time value of money.
Do Not Forget Stay-at-Home Parents
Replacement cost of services can exceed $150,000 annually. For a family with two young children, $300,000-500,000 of coverage is often appropriate.
Not sure where you stand? Schedule a free consultation and we will calculate your exact number together.