How much life insurance do I need?

The answer is that it depends who you ask. Your life insurance agent will give you an answer to this, and again, this depends on how good an agent he is. Don’t forget that insurance agents make their living from selling insurance policies. So if you are only a casual acquaintance or a stranger to the agent, beware, he will try and sell you as much insurance as he possibly can and which you may not need.

There is also another answer to the question. Not everybody needs life insurance. Someone who has no family and no dependents probably does not need life insurance unless he or she wants to leave money to a friend or a charity.

A good life insurance sales representative may suggest that you apply some kind of formula. In the past you would have been told that that you need life insurance equal to four times your annual salary. So, if your annual salary was $50,000, you would have been told that you need at least a $200,000 policy. But times change and today the same agent may tell you that you need eight times your annual salary, or a $400,000 policy.

But in today’s world this is probably too simple an approach, as it assumes you are your family's sole provider. You are probably not. You have to take into account many factors: does your spouse works, are you a single parent, what is the age of your children, how long will your surviving spouse will be raising the kids and so one and so forth. There are many factors to be considered and included in the formula.

The matter of life insurance is a lot more complicated and convoluted than it used to be. Consider that you may be able to convert your life insurance policy to your own personal retirement fund at some future age. Now all the thinking changes. You will be using life insurance to stay alive by providing you with a monthly income. If that is the case then you should be thinking about buying a much larger life insurance policy. You will be very pleased you did so one day when you are eighty years old and the monthly payment from the insurance company is all that’s putting food on the table.

What all this means is that you need the advice of a good insurance agent or consultant. Don’t be in hurry with this – choose the right person.

source: http://www.digimok.com/how-much-life-insurance-do-i-need