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Life Insurance - How to Evaluate Your Life Insurance Needs

Updated on November 27, 2011

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.

Do you think Life Insurance is worth the investment?

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    • oceansnsunsets profile image

      Paula 6 years ago from The Midwest, USA

      Thank you, PhoenixV!

    • PhoenixV profile image

      PhoenixV 6 years ago from USA

      Well done and informative!

    • oceansnsunsets profile image

      Paula 6 years ago from The Midwest, USA

      Thank you, GuardianInsurance for the visit and your comment. I think its smart for people to consider everything first, before making that big investment in insurance, as there may be something better and of more value for them long term.

    • oceansnsunsets profile image

      Paula 6 years ago from The Midwest, USA

      Abigail Smith, thank you for visiting my hub and for your observant comment! Glad you found it informative and up to date. I hope some find some help from this information.

    • profile image

      GuardianInsurance 6 years ago

      I agree with Abigail's comment above that this is a really up-to-date and informative article. What I really like about it is that you explain that people have different life insurance needs depending on their situation. Many consumers don't realize this and end up getting the wrong type of life insurance. It's important to think about what you really need and what is best for your family before you make an investment in life insurance. Thinking it through and comparing policies will help you to make the right decision!

    • profile image

      Abigal Smith 6 years ago

      I found this article very up-to-date and informative as it provides excellent tips to obtain the best possible Health insurance rates and quotes. With this handy information, you are able to make your decisions more wisely and obtain the best Health insurance plan for yourself. It highlights the importance of having Health insurance especially for the people above 65 years of age in helping them to plan for their Health insurance needs.