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exceptions. For instance, some single people provide financial support for aging parents or siblings. Others may be carrying significant debt that they wouldn’t want to pass on to family members who survive them. If you’re in these types of situa- tions, you should consider owning life insurance because you wouldn’t want your loved ones to be burdened financially in the event of your premature death.
Hopefully you now have a better understanding of whether or not you need life insurance. If the answer is yes, then the next step is to deter- mine how much coverage makes sense.
How Much Insurance Do I Need?
So, how much life insurance do you need? The answer isn’t really how much life insurance you need, but rather how much money your family will need after you’re gone. Ask yourself:
• How much money will my family need after my death to meet immediate expenses, like funeral expenses and debts?
• How much money will my family need to maintain their stand- ard of living over the long run?
Life insurance proceeds can help pay immediate expenses including uncovered medical costs, funeral expenses, final estate settlement costs, taxes and other lump-sum obligations such as outstanding debts and mortgage balances. They can also help your family cover future financial obligations. But how do you know if you need $100,000, $500,000, $1 million or more?
The Life and Health Insurance Foundation for Education recom- mends conducting what’s called a Capital Needs Analysis. First, you evaluate your family’s needs. Gather all of your personal financial infor- mation and estimate what each of your family members would need to meet current and future financial obligations. Then add up all of the resources that your surviving family members could draw upon to support themselves. The difference between their needs and the
Life Insurance Advantages and Disadvantages 23