How Much Life Insurance Do I Need?

Alright, so you might have established that you do in fact need life insurance for your family. This is a great decision that could really have a big payoff for them if you are no longer there to help them any longer. We commend your decision and think that it is good that you came to this conclusion wisely and it was well thought out. Now you have to go on with the next step. The next step is actually figuring out how much life insurance you will need.

Figuring Out This Amount

It is no as simple as just picking a random number. You actually need to go through a short little process in order to figure out what you need. When in doubt, just step back and remember that this is so important because it is something that is aimed at helping your family. The last thing you want to do is just rush through this decision and pick a number at random. That is not how your family will be served the best.

Here are four simple steps on deciding what you can use for life insurance. First, you need to figure out how much money your family will need each year to live successfully. Second, you will need to determine the interest rate that your spouse will still be able to earn. Third, when you have both those amounts figured out, you will need to divide the yearly amount by the interest rate. Fourth, and finally, you must not forget about your stocks, any bonds you have, as well as remembering about valuable assets. This is a short, easy formula that can really help you out if you are struggling with the decision of life insurance.

How Much is Too Much? Is Too Much Possible?

The best thing you can do is negotiate your life insurance while still staying able to put some money into savings. If you have extremely high monthly payments on life insurance and that is hurting your ability to pay bills or save money, then you might be paying too much. Whatever lacks in life insurance will be offset by the amount of money you have in savings. This is why it is so important to make sure you are paying attention to both.

In the end, you can never really say that too much life insurance is too much. You just need to make sure that it is not cutting into your ability to take care of other important financial matters in your life that must be attended to. This is when you should maintain a strong balance between life insurance and your other responsibilities. Everything will be fine then.

Additional Resources:

• Life Insurance
• Money101: Life Insurance