How Much Life Insurance Do I Need?
Many individuals recognize the benefits of a financial plan. A plan often uncovers problems and frequently provides the motivation to make needed changes. For the most part, the issues involved are positive and enjoyable (i.e. retirement, well-educated children). Planning for the unexpected - known as risk management - can be less pleasurable. A key part of risk management is answering the question, "What if I were to die today?"
Preparing for an untimely death is often referred to as "survivor benefit planning". It is a subset of estate planning and addresses the need to keep one's family in their current financial world. The ultimate purpose of survivor benefit planning is twofold:
- To ensure that the ongoing income needs of the survivors are met.
- To provide for immediate lump-sum cash needs.
Life Insurance Amount Checklist
Income Needs
How much income will the survivors need, now and in the future, to cover the following:
- Household Living Expenses - Will the family stay in the same house? Can they afford to? Do they want to? Will they have the option?
- Additional Childcare - Will there be a need for more help with young children?
- Educational Expenses - Will there be enough money for the children to go to college?
Lump-sum Needs
How much will the survivors need immediately and in cash? Consider the following:
- Final Expenses - More than the funeral, this includes unpaid medical bills, which after a long illness can be substantial.
- Estate Settlement Costs - Probate expenses, attorney's fees, death taxes,etc.
- Mortgage Payoff and Debt Reduction - Will it be important to provide a paid-off house? Are there any debts that should be retired?
It is important to reevaluate your life insurance every two to three years to ensure it is still accomplishing what you need it to do. Our situations change as we age and our insurance needs may as well. There is really only one final question, "If you died today, would your plan be ready?" Imagine Insurance Advisors can help you ensure you have the proper plan in place to ensure that your family is taken care of. Contact us today to help you get started protecting your family.
Find out about the types of life insurance that you may want to consider purchasing.
