Estate Planning

September is Life Insurance Awareness Month. I will be posting several articles on this subject and the importance of having enough insurance and the right kind of insurance. The following article is about determining how much life insurance you need and there is a link to a calculator at the end of this article.

The question isn't really how much life insurance you need, it's 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, such as funeral expenses and debts?
• How much money will my family need to maintain their standard 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 such as everyday living expenses, money for college or your spouse's retirement, and so much more.

But how do you know if you need $100,000, $500,000, $1 million or more? The most common way to determine your life insurance needs is by conducting what's called a Capital Needs Analysis.

Here's how it works. Start by evaluating your family's needs. Gather all of your personal financial information and estimate what each of your family members would need to meet current and future financial obligations. Then tally up all of the resources that your surviving family members could draw upon to support themselves. The difference between their needs and the resources in place to meet those needs is your need for additional life insurance (see below).

This may look simple enough, but calculating one's life insurance needs can actually get pretty complicated. To make it easy for you to get a general sense of your needs, check out our life insurance needs calculator. It'll walk you through the process and provide you with an estimate of your insurance needs in a matter of minutes.

• Life insurance needs calculator

SOURCE: New York Life