The Dime Method
Many people buy policies worth $100,000, $200,000 or $300,000, but that may not be enough. The DIME method offers a easy formula to calculate your life protection need:
How to calculate your protection need:
Example of a hypothetical case
$50,000 ( Combined credit cards, loans and other debts)
$360,000 ( $3k/mo. ( $36K/yr) income replacement for 10 years)
$200,000 (Mortgage balances)
$120,000 (Assuming $15k/yr for a 4-year college for 2 kids)
$730,000 Protection Needed
Most people have good protection on their houses and cars, but few have enough coverage for their loves ones.
With $730,000 of insurance protection, it this person dies too soon, the surviving spouse will have enough money to pay off the $50,000 debt, continue to have $3,000 income per month for 10 years or more, pay off the remaining $200,000 of their mortgage, keep the house, and still have $120,000 saved up for 2 kids when they are ready for college.
The DIME method will allow to you calculate exactly how much your insurance need is. People say, ” I already have life insurance!” They may, but the real question is do they have enough? How would you feel if your $300,000 home burned to the ground and when you file a claim, your insurer tells you have $50,000 worth of coverage? That normally won’t happen as the bank will make sure you have $300,000 of protection.
What your life and if you pass away? How would your spouse and kids feel when they receive a check for $100,000? After expenses, they may be left with very little and face a bleak future.