Your Life Insurance Needs
Setting the Terms of Your Insurance Before You Shop
Life insurance is a great way to protect your family in case of an unexpected death. Death really isn't all that unexpected though, everyone dies eventually and sometimes it is important to plan as if it is sooner. "Hope for the best and prepare for the worst" is a phrase most people are familiar with. When it comes to deciding how much life insurance you need it is important to not buy a plan that you do not need or can't afford. So if you are asking yourself "How much life insurance do I need?" you may be surprised to know that the ansewer may be easier then you'd think.
Who To Talk To
I would make a decision from the start to talk to at least three different insurance companies before your make your decision on how much life insurance you need. The concept of insurance at it's core can be very sensitive and easily capitalized on if you are not prepared to talk to several different companies about your needs and what they offer. While insurance sales people can probably be knowledgeable and helpful, they are also in front of you to make a sale so that will be their top priority.
Get In the Ballpark!
However you don't need to be intimidated about this. In order to be better prepared, it's best to have a few numbers in mind for getting your quote on life insurance. The first number is how much will your family need to live on for a few years after your death? If it is a married couple and a cat, then your number should be fairy low. If you have 4 children that number will be considerably higher. The second figure to keep in mind is the amount of debt you have. This would be your mortgage, student loans, car loans, credit card debt, etc. At the very least, your policy should cover this figure. If you total $75,000 in debt, then $100,000 would be a minimum policy you should take in order to make the policy worth your time.
What Do You NEED?
But of course, you don't want to just take care of the debts you have you want to be able to sustain the life of your family even in the case of your death. Life insurance income will never be able to replace a solid income from a family member, but it can insure that your family will have plenty of time to recover from the loss and find alternative means of income. The last thing to evaluate is what your other investments and assets are. If college funds are already set up for your children, then it would be unnecessary to make provisions for this in your life insurance policy. If you have a maxed out or healthy 401K, keep in mind that it can also function as a long term safety net as well for your family and can reduce the need for as much life insurance.
The Break Down Figure
In the end it is very simple, decide on a figure that accounts for debt, expenses for X amount of years, and any additional provisions you feel are worth increasing your policy for. Adding these up will give you a rough figure that you should go into insurance consolations with. If an agent suggests a bigger plan with more expensive options then demand quantitative reasons for why that would be necessary. If you are ever uncomfortable or do not feel like you are getting the results you want after your initial first three visits with insurance companies, then keep looking! It is a big decision and deserves whatever time or planning it takes to put your policy in place.
Keep in mind that some life insurance is usually better then no life insurance as long as you can budget to make it a reality.