—End-of-life expenses

—Funeral costs

—Charitable contributions

—Debt management

—Income replacement

—Business protection

Although there are many ways to calculate a potential coverage limit, one popular method is the DIME formula, which takes into account your debt and final expenses owed, total income based on what might be needed after your death, the amount left on your mortgage and any outstanding or expected expenses for your dependents’ education or schooling.

For a simpler method, you could take out a policy with a death benefit that equals 10 times your current income. However, this strategy doesn’t take your family’s living expenses into account. You might prefer to use an online coverage calculator that asks you to enter specifics like your expenses, mortgage or education costs to come up with a more accurate estimate. Some individuals prefer working directly with a financial adviser or Certified Financial Planner when determining their coverage needs.

2. Pick a life insurance policy type

There are two main types of life insurance: term and permanent. Within permanent insurance, the two primary types are whole life insurance and universal life insurance. Term life insurance is usually less expensive with fewer benefits, while permanent life insurance is typically more expensive as it offers more benefits. Here’s a closer look at what these policies cover and how they work:

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