Life Insurance on a D.I.M.E.
How much is right for you?
September 9, 2011
Worried about how much life insurance you need? Check out the life insurance calculator on ERIE’s Web site to find out in five minutes or less how much coverage you’d need. Or, try the D.I.M.E. method: add the following together to come up with an estimate.
D—Death expenses. These include burial costs (an average funeral costs $6,000-7,000), unpaid medical bills not covered by insurance, credit card balances, emergency funds and any other short-term obligations.
I—Income replacement. If you’re the primary wage earner, how much income will your family need to carry on, assuming all the other expenses are paid?
M—Mortgage cancellation. Are you a homeowner? Chances are that your family will want to keep their home in the event of your death. If you’re renting, set aside a rent payment fund for several years, or enough proceeds to buy a house.
E—Education fund. Do you plan to help pay for your children’s college education? Will your surviving spouse need to return to school?
Then, subtract your present life insurance and other cash assets that could be used to pay for these. The final number is an estimate of how much life insurance you’d need for your family to carry on.