If you're wondering how much life insurance you need we're going to talk
about that in this video and while it isn't a black and white answer in this video
I'm gonna give you some specific ways you can tell and figure out how much you
need I posted something to Facebook about life insurance and I got this
comment from a reader that is just kind of stuck with me
you know because I think the truth is that most of us haven't experienced
something like this but this is real life and unexpected stuff happens and it
would be wise of us to be ready for the unexpected now I do need to add that I'm
not a life insurance agent I'm an enthusiast I'm someone who's interested
in this stuff so definitely consult a professional if you feel uncomfortable
making any decisions and just view this content as educational and with all that
out of the way let's get to it
so the first in easiest way probably to tell how much life insurance you need is
to actually use a calculator and typically a calculator like this is
going to ask you a number of specific questions about your financial situation
to help you determine you know how much you actually need because this isn't a
one-size-fits-all answer and the calculator that I use for this is over
at Policy Genius and I went ahead and ran a sample scenario using this
calculator so you can kind of get a feel for how this calculator works now we are
affiliate partners with policy genius so if you do decide to use this and we'd
appreciate if you use our link because it'll help support the channel support
our mission of what we're trying to do I mean we'll have all those links up above
or down below in the description as well and so to give it at this calculator all
you need to do is just click on this page here and I will have a link up
above so you can get over there and then they have a big button to calculate
coverage you can just click on that and then it will get you started going
through this process so that is probably the easiest and quickest way to get the
most accurate estimate for how much life insurance you need now there are two
other fairly popular methods for kind of determining how much life insurance you
need so we'll go ahead and cover those now and one of them is called the 10x Rule
and basically the gist of this is that you take your annual salary and you
multiply it by ten and that's the amount of coverage that you need so if you make
$50,000 a year then you would want to get $500,000 of coverage and I view this
more as a general rule of thumb maybe like a more of a ballpark number to
consider because everybody's financial situation is so much different if you're
you know in your mid-30s and you have five kids and you have a wife who stays
at home and you have much savings like that's gonna look
a whole lot different than if your empty-nesters you know when you have a
big retirement savings and all your debt paid off like those are two very
different scenarios and while rule of thumb like this can give you a ballpark
to kind of consider and get started you probably should dive a little bit deeper
to get something a little bit more accurate for your specific situation and
that leads us to another popular method of determining how much life insurance
you need and that is The Dime Formula and in the case of this formula D.I.M.E.
stands for Debt Income Mortgage and Education and these are the four factors
to consider when determining how much life insurance you need and basically
this would work like this you would take all the debts that you have exclude your
mortgage but just focus on all your other debts and total them up and next
you would go look at your income and you would figure out what your annual income
is and hopefully you know that and they would multiply that by the number of
years that you think your family would need support without you being there and
then after that you would look at the mortgage and you would figure out how
much mortgage debt you have and they do would take that number and then finally
for the education component you would add up all of the estimated education
expenses for all of your kids and now you would take all four of those numbers
and add them up for one grand total and that is the amount of coverage that you
need and as you might be thinking even with a formula like that there is
there's definitely some gray area and there's some things that just aren't
really really clear and so that's the thing it's like it's just an estimate
but the bottom line is that it's a whole lot better to have some life insurance
than to have no life insurance so even if you're underinsured a little bit it's
just far better than not having any insurance at all alright so last week I
get a question from a reader asking this I'd like to get your take on someone who
doesn't have a lot of debt in a nice sum say for retirement in the need for life
insurance so question is basically this do you need life insurance if you're
debt-free and if you have a big retirement savings and I told her that
that's actually our situation pretty much as well and so we have all of our
debts paid off and we have a decent amount say for retirement but I have two
kids and a third on the way and I have wife who stays at home with them and so
I think it makes a good amount of sense for me to have insurance to kind of
cover my family now even if I wasn't the breadwinner in the family there are
still things to consider like funeral expenses because you would hate to have
to pull money out of your 401k or borrow equity from the house to cover the
funeral expenses and especially with life insurance particularly term insurance
being so cheap that it just it makes sense to get it if you can and so
the next question you probably have is what I had the first time I did this and
that is how do I get the cheapest policy I don't want to pay too much for it I
won't give the cheapest policy that's gonna get the job done and the answer is
that you need to shop around you need to look at different insurance carriers
because they're all different in depending on your actual situation
you're going to find a different rate and this is why Policy Genius has been
my go-to recommendation after all these years of looking at all these different
insurance sites because they do this so well they let you compare quotes from
dozens of insurance companies all on one page and then they could take care of
all the paperwork for you as well and then on top of that they have
noncommissioned agents who will answer your question so these guys are doing it
right and they really make it as simple as it possibly can be so like I said
before we are affiliate partners with them so you can support us by using the
links in the description up above down below to get over their website and just
in case you think that I am recommending them just because we're affiliated
partners the truth is is we could be affiliate partners with any of the life
insurance companies out there and this is actually the one from my years and
years of doing this I actually like that I actually use and that's why we've
chosen to be affiliate partners with them and as a little bit more incentive
for you if you decide to get life insurance and kind of go through our
link to get to policy genius to do it I would be happy to send you a copy of our
book completely for free so if that interest you will have instructions down
in the description below so we can get you all hooked up and if you're new to
our channel welcome so glad you're here and what we do here is we talk about
practical ways to kind of put more money in your pocket and to be wise with money
but then we also talk about some of the timeless biblical principles and how to
manage our money wisely and so if that's something that resonates with you you
can consider subscribing so you can hear from us as we create more hopefully
awesome content that you will enjoy alright that is all for today and I will
leave you with one last thought regardless of how you do it just make
sure your family is insured make sure that you have life insurance coverage
just in case you happen to meet Jesus a little bit before you expect we want them taken care of
so that's all for today have a great rest of your day and I'll see you soon