Life Insurance: How Much Is Enough?

Sometimes people buy life insurance before performing a financial needs analysis. they might choose an amount that seems comfortable, without actually taking into account all the potential expenses their families might face in the event of an untimely death. If they did make an objective assessment of the possible economic consequences, they would be doing what is called a financial needs analysis.

In order to determine how much cash is needed following the death fo a spouse, take a look at these potential cash needs and assign a dollar amount to each:

1. IMMEDIATE MONEY FUND. This includes the total cost of possible medical and hospital expenses, outstanding bills, burial costs, and attorney/executor fees.
2. DEBT LIQUIDATION. Your debt may be in the form of credit card bills, school and auto loans, unpaid notes, outstanding bills, etc.
3. EMERGENCY FUND. Unexpected bills not readily payable from current income could included major home and car repairs, or even medical emergencies.
4. MORTGAGE/RENT PAYMENT FUND. How much would you need to pay off your mortgage or provide for at least ten years' house or apartment rent should one spouse die?
5. CHILD/HOME CARE FUND. Expenses may be created as a result of the death of a spouse who had been performing child and/or home care duties; be sure to estimate the cost of hired help needed to substitute your spouse's duties.
6. EDUCATION FUND. Be sure to include the cost of funding a four year undergraduate education or comparable vocational training for your children.

The steps noted above are a simple way for a family to figure out how much life insurance is really needed. Circumstances vary from person to person and from family to family. Analyzing your financial needs in detail is an important step toward determining the right coverage for you and your family.

We here at JM GetMoore Insurance & Financial Services have some ideas regarding this subject. Contact us at (956) 928-1811 for more information.