Well, everybody has a different life insurance need.
Not a helpful answer, right? But it is a fact that everyone has unique life insurance needs. This blog should help figure out what your unique need is. The more you know the more effective your financial planning will be.
The best way to answer to the “How Much?” question is to complete a Needs Analysis. A Needs Analysis is essentially is a balance sheet that lists all your financial obligations and compares them to your readily available assets. If your obligations exceed assets then you should consider life insurance coverage.
When considering life insurance it’s a great idea to think of your financial obligations as either fixed-term or permanent obligations.
Car loans, a child’s post-secondary education, mortgages and debt would fall under the fixed-term obligation. In other words, the financial obligation is temporary.
If the financial obligation doesn’t seem to fall under fixed-term, it could be a permanent one. Permanent financial obligations are often the items that complete your estate plan. Things like capital gains taxes, probate fees, funeral costs, and legacies are all considered permanent or lifetime obligations.
Often an insurance plan that covers both fixed and permanent financial obligations is good idea. A combination of of higher amount/lower cost term insurance and lower amount/high cost permanent insurance can work well. As temporary financial obligations are paid off, it is possible to reduce the amount of term coverage while maintaining the amount of permanent life insurance.
Working in the education community? Get a free online Needs Analysis today!
Read more about Term vs Permanent here in our ongoing Insurance 101 blog series.
Have a question about personal insurance answered? Let us know on Twitter or Facebook!