This article came to me from a colleague, and I found it to be very helpful. I was asked to share with those I serve. Enjoy!
Many people buy life insurance before conducting a financial needs analysis. They might choose a benefit amount that seems appropriate, without considering the potential expenses their families might face in the event of their untimely death. To make a comprehensive assessment of the possible economic impact, take the time to conduct a financial needs analysis.
To analyze your financial needs, consider the following simple steps: First, write down the total value of all assets that you and/or your spouse own. (Enter amounts in one column for yourself and in another column for your spouse.) When totaling your assets, be sure to include what you currently have in savings and retirement funds (such as IRAs, 401(k) plans, annuities, etc.), as well as real estate and life insurance. Next, list and evaluate all expenses you or your family might face if one spouse were to die. These are your potential liabilities.
In order to determine how much cash would be needed following the death of a spouse, take a look at these potential needs and assign an estimated amount to each:
The total of all of the above costs, less your liquid assets and life insurance, would provide your new financial needs. The numbers may be different for you and for your spouse, because assets and existing life insurance, as well as child/home care amounts, are likely to be different.
The steps above are one method for determining how much life insurance may be needed based on individual circumstances. Analyzing your financial needs is an important step toward ensuring the right coverage for you and your family.
Copyright © 2014 Liberty Publishing, Inc. All Rights Reserved.
>>>Republished with permission John Kenneally 4/22/2014
How Much Life Insurance Do You Really Need?