Understanding Insurance Talk and DIME Method with Sade Elam
I have met Sade Elam five years ago through a mutual friend and loved how she incorporates insurance and talks about it directed especially to women.
Based on Dave Ramsey’s talk about ‘Understanding Insurance’, I have recently talked with Sade and here’s what happened:
Sade’s grandmother passed away three years ago because of a very unexpected and unfortunate event. That time, her grandmother did not have insurance, although she has reminded her dad of it way before. That time also was when they have realized how important to have insurance is because it provides the proper protection and defense for emergencies. What happened was their family went on a total withdrawal of every single penny possible. They pooled money together. This includes their 401k, savings, and even equity, to compensate for losing her grandmother. Now, this is what will happen to people who have no insurance. The pain and grief that comes along the death of a loved one also come along with the burden of financial loss.
On the other side, looking at it as a parent or as a mom, if you have young children who still cannot take care of themselves if by any case you bid farewell soon, then getting insurance is very important. One, it covers mortgages. Two, it saves you and your family from supposed debts. Overall, you do not leave them with a financial burden— you leave them with financial security knowing things are prepared even after you are gone.
Insurance indeed is transferring risk from you to the insurance company. Further on, she has encouraged us to practice this so that we may be able to completely understand how much insurance we actually need to protect our family, loved ones, and assets. She calls this the ‘DIME Method’.
The D stands for Debt.
This includes your mortgage, student loans, or any other debts you have. Write the debt value beside the letter D.
Next is I, which stands for Income.
Look at your annual income, then multiply it by at minimum 10, especially if many people depend on you. She recommends the standard of 7-10 years because she believes that this is enough time to bounce back, not worry about their finances, and adjust to a life without you.
M stands for Mortgage.
This will also apply to people who are being depended on to pay rents. For a mortgage, take the remaining balance, then minus let’s say a hundred thousand. For those who rent, take your monthly bill, then multiply it by 12, then further multiply it to a couple of years for those who depend on you.
Last, E stands for Education.
If you want your children to go to college and not pay loans if you are here, then it should still be the case though even after you are no longer here.
What’s good about insurance is that it is tax-free money, making it the easiest way to shoot down wealth to your family and loved ones. Consider and do the DIME method as we do not know what tomorrow lies ahead. Preparation is key to everything.