How much Life insurance do I need?

Everybody has different needs. The amount of life insurance you need is based on your individual situation and will change during the course of your life. Basically it comes down to how much money your loved ones would need to remain on firm financial ground if you or your earnings were no longer in the picture.

To get started, it helps to consider a few questions like:  

• How many depend on me for their financial stability? This may include a spouse or partner and children, but your list may also include siblings, aging parents and more.
• How long would they need financial support? Consider the ages of everyone who depends on your earnings.
• Is anyone disabled or have other special needs? It’s important to remember that some people may need lifelong support.
• How much debt do I have? You’ll want more coverage if you have a mortgage, auto payments, credit card debt and other outstanding loans.
• How much in available assets or savings do I have? Factor in all of your savings and investments and how liquid they are—some investments like real estate cannot instantaneously be converted into needed cash.
• Do you have a child or children that will need assistance with college or professional training? If so, you’ll want to up your coverage level.
• Will my spouse or partner need help with funding his or her retirement? If so, more coverage is needed than if he or she is fully funding his or her own retirement.
• How much to allow for anticipated inflation in the future. While it is impossible to know the exact rate of future inflation, it is wise to make an allowance for the future based on historical data.
• Do you have a church or charitable organization that depends on you for funding? If so, you may consider planning for a contribution while they try to arrange alternate sources.

A major factor is your budget. It is important to prioritize the above considerations and adjust your list to fit your budget. While you may wish to provide for those most important to you when you are no longer here, it is also important to provide for them and yourself while you are still with them. Don’t commit to higher insurance premiums than you can afford. A lapsed insurance policy, (due to non payment) protects nobody.