By Life Quotes, Inc. Staff

Figuring out the amount of life insurance that best fits your needs can be overwhelming. Most people would rather find something else to do than wrestle with their own mortality and tackle the subject of life insurance. But it’s necessary to ensure that your loved ones are protected if something were to happen to you.

When purchasing a life insurance policy, there are several things to consider, according to “McGill’s Life Insurance” by Edward E. Graves:

The amount
Premium dollars available
The financial objective and the amount of death benefit

Rather than relying on outdated formulas that hardly give you a precise answer to how much life insurance is sufficient, it is best to use a life insurance needs calculator or consult a financial planner.

“Once somebody’s made a decision what kind to buy and how much, they should take a look at a life insurance needs calculator to calculate the amount that is best for them. They can also contact a financial advisor who can help them do a more adept analysis in order to determine what types of insurance they need and how much they should buy,” says Jack Dewald, chair of the Life Foundation, a non-profit insurance education group. “They have to ask themselves if it’s for a short period of time in the event of premature death, or if they need a more permanent policy for state tax liquidity issues.”

CASH NEEDS

Immediate expenses
· Medical and hospital expenses
· Burial/funeral expenses
· Attorney/executors expenses
· Probate court expenses
· State death taxes
· Federal estate taxes

Debt liquidation
· Credit cards
· Car payments
· Student loans

Emergency fund
· Home repairs
· Medical expenses

Mortgage/rent payment fund
· Mortgage payoff
· Rent (Equal to 120 percent of rent payments made over 10 years)

Child/home care fund (provided until the child reaches the age of 18)
· Baby-sitting
· Laundry
· Cleaning
· Home and car repairs

Educational and vocational fund
· Surviving children’s education

INCOME NEEDS
An approximate evaluation of the surviving spouse’s annual income requirements over their remaining life expectancy should include:

· Taxes, after-tax earnings
· Inflation percentage
· Social security benefits
· Other sources of income
· Providing capital (capital that your spouse and heirs will receive)

When you consider how much life insurance to purchase you will need to bring the following documents:

Life insurance policies you already have
Receipts, dependent care expenses
Most recent income tax form
Credit card billing statements
Checkbook

Also, there are a few factors to keep in mind when going through a needs analysis.  Life insurance does come with what is called a blackout period. This is an adjustment for the loss of social security benefits that occur when the youngest child leaves the nest. In addition to that, there is a reduction in benefit after the surviving spouse reaches the age of 60.

Remember, as you get older and experience new life events your insurance needs will change so its best to review your policy at a minimum every two to three years or when you experience a life changing event such as purchasing a home, having a child or going through a divorce.