Life Insurance - How to Evaluate Your Life Insurance Needs
Everyone's insurance needs can differ in regards to life insurance because each situation is so different. If you have a family and young children then your needs in this area will differ greatly from if you are single and in your retirement years with no mortgage. To those that have a mortgage, or hope to send their kids to college one day, the gap that life insurance fills upon your possible death is incredibly important. It can make a huge difference to those that survive you and can take off so much financial stress that would otherwise be possibly overwhelming.
Death isn't the only thing either, but if you should become disabled. The same idea applies there. Perhaps however, that you don't have any dependents, or that they are completely self sufficient, then your life insurance needs will be different.
How much Life Insurance Do You Need?
This question is fairly simple to answer. You basically need enough money for your dependents to have enough funds to cover all their immediate needs. Another way of looking at it is to have enough to cover their immediate cash needs, and living expenses for however long you think they need it.
Ideas to Consider
Generally speaking, the older you are, the less life insurance you will need to take out. The reason is that usually their biggest expenses in life like a home and college tuition has been covered and dealt with already. Their financial obligations have likely been met much earlier in life than the younger couple's obligations have been met. Add to this that their investments are now producing the long awaited income they were working toward.
You may get differing results when asking different experts what they suggest in regards to how much is enough for life insurance. A good general rule of thumb is to take 5, 7 or 10 times the amount of one years salary as the amount. That can change however, depending on your lifestyle, and other sources of income. Also, the number of dependents that you have will make a large difference in the final amount you decide to go with.
When you are in the decision making process, consider looking at all the possible different options and what each one of those would cost you. We have found that going for a bit more doesn't necessarily cost a whole lost more. Every situation is different however and you need to do what is best for your family. Take you time as it is an important decision. Your family will be thankful that you considered them in this way if the worst should happen.
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