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Things to Consider

Although there is no universal rule to determine the amount of life insurance coverage you need, a common guideline is to take out a policy that is seven times your salary. Unfortunately, the average person has a policy that is only about three times his/her annual income. Insufficient coverage might leave your family saddled with debts in the event of your death. Here are some things to consider when you get some life insurance:

• How much debt would you leave to your family?
• What recurring expenses will your family face?
• How much will your final expenses be (funeral, medical, estate taxes, etc.)?
• Will your family be able to maintain their lifestyle over time?
• How much will it cost to put your children through college?
• Will your spouse need supplemental income for retirement?
• What long-term goals does your family have?

Analyze Your Needs

If you would like a more exact assessment of how much coverage you need when you get some life insurance, perform a needs analysis. This involves:

• Putting together financial records to determine your history
• Computing your family's investments and savings
• Taking an inventory of each member of your family and his/her long term goals
• Asking how your family would sustain their present standard of living if you die
• Estimating how much it will take to meet your family's financial needs in the present and the future (also take inflation into account)