You have many options that will help you decide which policy is best for you. You can just guess that a certain amount will do the job.
You can use the rule that many agents use which amounts to somewhere between 5 and 10 years income.
Or you can use a life insurance calculator specifically designed to tell you precisely how much life insurance you need after you answer a few questions.
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The questions go something like this for couples, with or without children. You can also apply them to anyone who has someone financially dependent on him or her.
1 - How much do you anticipate your loved ones will need to pay for funeral expenses? In today's world that would be about $10,000.00
2 - What about Estate Taxes, how much do you need to put away to take care of that? This can be considerable depending on the size of the Estate.
3 - Excluding your mortgage, how much unpaid debt do you have? Figure it out and enter that figure in the space provided on the life insurance calculator.
4 - How much liquid cash do you think would be good to put aside for unanticipated emergencies? This depends on ones lifestyle. Each person will come up with a different figure.
5 - What of a college fund for the children? How much do you think this will amount to for each. You can low ball that at about $75,000 for each child.
6 - If you were taken out of the picture what would the living expenses for the family be? How much will it cost per year? Here we are talking about anywhere between $25,000 and $150,000 for the average person. For more affluent people, accustomed to living big, this amount can be humongous.
7 - We need to take into consideration the spouses income and enter that amount. This will be deducted from the amount of income needed making the need arrived at by your life insurance calculator quite realistic.
8 - We also need to consider the Social Security benefit the spouse will receive.
9 - What kind of liquid assets do you both have? What is the value of your savings and investments? Arrive at a figure and enter that into the space provided.
10 - You know your spouse well, what kind of approach does s/he have toward investments? Would you consider the spouses approach aggressive or is s/he more conservative in this area?
For the business person the questions would be a little different.
1 - As the sole proprietorship and the owner of the business are one in the same the questions would be similar to those asked a married person.
2 - Partnerships and corporations use the value of the business and the amount of shares owned by each partner or shareholder to determine the dollar value of the amount of life insurance that would be placed on each life.
Here is a life insurance need calculator that you will find quite helpful:
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