One of the most difficult parts of buying life insurance is determining how much you need. Since everyone has different financial goal and circumstances, there is no rule of thumb that can tell you with any precision how much to buy.
The best way to determine your life insurance needs is to have an insurance professional conduct what is called a Financial Needs Analysis. Simply put, a Financial Needs Analysis takes into account your current financial picture, plus your family's future needs minus any current insurance coverage and accumulated assets. Although this sounds simple, coming up with all the input numbers can be tricky; plus you'll want to factor in inflation and returns on investments. There are numerous financial calculators available to assist you with these calculations.
Here's how it works: determine your family's needs, current and future; tally up all existing resources, including life insurance you may already have; the difference between the two is your needed amount. See diagram below.
Remember, the best place for guidance and assistance is to meet with a qualified insurance agent or financial professional.
