How to choose the right coverage
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Personalizing your coverage amount and term length
There are several factors that can affect how much coverage you need, and how long you need it for. The two variables to adjust based on your unique situation are coverage amount and term length.
Coverage amount

There are a few ways to think about your coverage amount. A simple way to calculate this is by multiplying your annual salary by 10. Or, you can use the tools below to get a more detailed estimate. Alternatively, you can use the DIME method to add up what you need.

Total coverage = Debt + Income + Mortgage + Education costs

If you want help getting a more detailed recommendation, try our Coverage Calculator.

Term length

Determining the right term length can depend on several factors. Consider a term that would cover your family for the number of years they would depend on you, financially or otherwise. You may want a term that lasts until:

  • You retire
  • Your children are grown and are no longer dependents
  • Your mortgage is paid off
  • You reach your savings goals
For example

Take Mike. He’s a 35-year-old man who makes $75,000 per year. He has a 2-year-old child, and another on the way. Mike and his wife recently bought a house and have signed a 30-year mortgage. He regularly contributes to his retirement fund and plans to have enough saved for himself and his wife to retire at the age of 65.

Financial experts often recommend multiplying your annual salary by 10 to get a general idea of your coverage needs. Because $75,000 x 10 = $750,000, Mike should consider getting $750,000 in coverage.

When it comes to term length, Mike needs to think about his mortgage, when his children will become financially independent, and retirement savings. Because he will owe payments on his mortgage for 30 years, a 30-year term will provide protection during this period of time. Within 30 years, he also expects his two children to be financially independent and to have enough retirement savings set aside. For all these reasons, a 30-year term seems to suit Mike’s coverage needs best.

And there we have it. Mike will apply for $750,000 in coverage for a 30-year term. You can use our Coverage Calculator to help estimate your specific needs.

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