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You know you need life insurance, but you may not be sure about how much you need to secure your family’s future if the unexpected occurs. We offer life insurance policies at Allen & Associates Insurance Inc. in Albany, OR.
10 Times Your Income
The most straightforward way to estimate how much life insurance you need is to apply the rule of 10. This rule suggests that you should multiply your yearly income by 10. Although this can be a reasonable starting point, it does not consider your family’s unique circumstances and needs.
Income Replacement and College Expenses
You can apply a different method, multiplying your income by 10 and adding $100,000 per child for college expenses. This strategy aims to replace your income for ten years and ensure your children can afford a college education.
DIME Method
For a more comprehensive assessment of your family’s needs, you can use the DIME method. DIME stands for Debts, Income, Mortgage, and Education.
This method involves adding up all debts, excluding your mortgage. Determine how many years of income you wish to replace, and multiply your yearly income by this number. Then, include the amount you owe on your mortgage. Finally, add the projected cost of sending your children to school or college. Tallying all these figures will give you a well-rounded idea of the financial safety net your family would need should you pass away.
Stay-at-Home Parent Formula
If one parent stays home full-time, you might think they don’t need life insurance. However, if you consider the cost of replacing the stay-at-home parent’s contributions, you’ll find they save the family a significant amount of money. Use the replacement cost of their tasks as their annual income to determine how much life insurance you need for a stay-at-home parent.
Life Insurance at Allen & Associates Insurance Inc.
If you need life insurance in Albany, OR, contact Allen & Associates Insurance Inc. Our friendly agents are eager to discuss your needs and help you choose the most suitable policy.
