# Check out this easy method to calculate your life insurance needs

We get a lot of calls about life insurance, and often an early snag in the process is figuring out how much coverage you really need. There are a number of calculation methods we can use, but a quick and easy to understand method is the DIME formula.

Here’s how it works:

D (ebt) Calculate all of your debts , plus anticipated final expenses like funeral costs. Do not include your mortgage balance in this section. For example, if you have a car loan for \$10,000, plus credit card debt of \$3,000, and estimate funeral costs at \$8,000–add these to get \$21,000.

I (Income) Decide how many years you would like to continue an income stream for your family, and multiply your income by that number. For example, if you have children ages 10 and 12, you might choose to continue financial support until your youngest reaches age 21. If your annual income is \$60,000, multiply 60K X 11 (number of years until your youngest is 21) to get \$660,000.

M (ortgage) Add in the amount it would take to pay off your mortgage. For this example, use \$150,000 as your mortgage balance.

E (ducation) Include an estimate for post high school education. In this case, with 2 kids— let’s estimate \$50,000 per child to get \$100,000.

Adding up all of these obligations will give you a good overall picture of how much life insurance is needed to take care of those that depend on you. You can add another step by adding up current financial assets like, savings, investments, and insurance provided by your employer, and subtracting from your overall life insurance needs.

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