About Life Insurance

When finding our how much or if you need life insurance at all, your situation will be unique. Every person's amount of needed life insurance coverage and time horizon is different. The beauty of the capital needs analysis is that it takes into account all of the quirks that make you and your situation special.

Calculating how much life insurance you need shouldn’t be a guessing game. You can assess your life insurance needs -- and the needs of your loved ones -- and make a calculated assessment. The average funeral in the U.S. is now more than $6,000, though the true sum can easily reach $10,000 once a burial plot, flowers and other costs are included), to the atypical, such as the special needs slush fund most people should include in their insurance calculations. (A safe estimate is about $20,000 to $25,000 to cover unexpected one-time and ongoing expenses.)

A lot of life insurance advice seems to be based on your marital status to determine your insurance needs. That's not exactly the issue. The most important factor is if you have any dependents -- those who are (or who will be) counting on you to support them, either partially or fully -- and how many dependents you have. Here are other major factors to consider:

If one of these scenarios applies to you, start thinking about life insurance:
  • The kind of lifestyle you want to provide for your family.
  • Your non-working spouse, who wouldn’t have an income if you died.
  • Your working spouse, who would "retire" to raise your children if you died.
  • Other sources of household income (such as a second paycheck).
  • Any debts that you want paid off (such as a home or car loan or credit card).
  • Your family’s college expenses.
  • Any special needs, such as a handicapped child or a child who will never be self-supporting.
  • You have a mortgage that is more than the value of your house
  • If your estate approaches $1 million if you’re single or $2 million if you’re married
  • Any final expenses incurred at your death.
  • Your parents may depend on you in the future, or that you may want to help pay for college costs for a family member (a niece or nephew, for example)
  • if you have children, you should have life insurance in order to leave them an inheritance and to cover your part of their college costs.
  • A relative has co-signed on your mortgage; having it paid off immediately at your death means he does not have to make monthly payments until your home is sold, were you to die with not enough insurance coverage.
  • You have a friend or relative to whom you want to leave money.
  • You have bought a house with your live-in partner and you have an agreement that each person’s share of the mortgage is to be paid off upon his or her death.
  • Your parents won’t be able to manage financially if you’re not around.
  • You want to leave money to a charity or other nonprofit organization.