Life insurance is one of those topics that can often be taboo. Why? Because nobody likes to talk or think about death but it’s the one thing we can’t avoid. As a result it is very important that we plan for the inevitable by purchasing some form of life insurance. It’s just smart and gives you and your loved ones peace of mind.
Purpose of Life Insurance
The primary purpose of life insurance is for income protection in the case of premature death. If you’re the sole or main provider for your family or someone depends on your income for survival, then you should definitely have insurance. If there is no need for a death benefit there is no need for life insurance. For example, if you are single, have no kids.
The amount needed depends on your living situation as well as other pertinent details…it can get complicated. However, a great way you can ensure that you have the basics covered is by using the DIME method.
Debt – It’s important to ensure that all of your debtsare paid upon your death, including your funeral cost. It’s the honorable thing to do and it eliminates your loved ones from having to deal with the debt burden, especially while they are grieving.
Income – Make sure that your policy covers your yearly income for a number of years. The exact amount of years depends on your living situation. For example if you have a spouse who does not work or have children under the age of 18, then it would be wise to have your insurance cover how ever many years needed until the child is at least 18. This income will take of your family for years and alleviate a lot of stress.
Mortgage – The first thing that should be paid off is your mortgage after your death so that your spouse/children or other dependents will have a place to stay without the worry of being evicted.
Education – If you have kids, then you want to make sure that their college education is paid for upon your death. You children will thank you for it.
You can’t go wrong remembering the DIME method when purchasing life insurance. Having an adequate amount of insurance available to covers the basics and then some is just simply smart and financially responsible.
Do you have an adequate amount of life insurance? Now is a good time to review it.