How Much Life Insurance Do I Need?
How much protection does a family need? That's a difficult question because it depends on so many factors that can't be predicted - like how long you will live. A simple approach is to plan for the worst case (e.g., immediate death) and decide how much money surviving family or loved ones will need to handle such matters as...
- Final expenses, including funeral costs
- Debts, including mortgage
- Estate taxes
- College expenses for children
- Survivor living expenses
The last category is in many cases the most difficult to compute. Perhaps the best philosophy is to plan for the family to 'remain in their own world' by providing the resources they will need to maintain the standard of living to which they are accustomed. An important process of financial planning is to explore the many variables and how they can affect this goal.
Number of Years to be Provided For:
If you could be sure of living a long life, this number may be small; but the purpose of life insurance is to provide a death benefit for survivors if you aren't so fortunate.
Number of Dependents, Such as Spouse and Children:
The age of children also matters, as income earnings could be limited in the case of a surviving spouse who wishes to stay at home with the children until they are older.
Desired Standard of Living:
Unless you want your spouse and children to suffer a decline in their accustomed standard of living, it is wise to plan accordingly and to consider the impact of inflation.
|
