How Much Life Insurance Do You Need
How much life insurance do you need? This question is asked by every person that has ever had the thought of purchasing life insurance. Even those that do not end up purchasing life insurance usually still ask the question at some point throughout their lives and usually have no way of finding an accurate answer to their inquiry. I am Nevin Shennett and I have been in the insurance industry for four years. I have owned my own agency for three of those years. In that time, how much life insurance do I need is by far one of the most asked questions I have encountered throughout that time. And it is an understandable one. Most individuals understand that they do not know how life insurance works and more importantly, how much is actually needed and how to find out the answer to that question. Luckily there is a method to understanding exactly how much life insurance any person needs to be properly insured.
The best way to find out how much life insurance a person needs is by doing a needs assessment. A good insurance agent will be fully aware of a needs assessment, however anyone can do a needs assessment for themselves and it is quite simple as long as the steps are followed accurately and honestly. The first step in the need assessment to finding out how much life insurance you need is to ask the obvious question. What type of funeral service do you want to have and do you want a funeral at all? The details of this can get quite long but attempt to keep it short. Does the insured want to be buried or cremated? How large of a church would the insured want? How expensive of a casket does the insured want? What are the going rates for funeral services in your local area for the quality of service that the insured is asking for? Once these questions have been answered and rough values have been provided for each question that was asked, these numbers should be added up to compile a rough estimate on how much funeral services for the insured’s desired burial method will cost. This number should kept off to the side to be utilized once again after the second, larger step.
The second step in the needs assessment that will allow you to know how much life insurance you need is to go over the wants of the insured. The wants of the insured are things the insured would like to happen in their absence if they passed away in an untimely fashion. These questions are designed to find out a need, but most importantly to find out how much that specific need will cost. Some examples of this can be, would you like your child to go to college? What college would you like that child to go to? How much is tuition at that institution currently and how much do we expect that cost to rise to in 15 to 18 years? What would you like your spouse to be able to do in your absence? Would you like them to be able to take vacations or pay off the house? How much would those things cost in today’s money and what do we expect that price to rise to over the course of the next 10 to 20 years? Any other things of this sort that would be things the insured would want to be able to get accomplished should they pass away suddenly can also be questioned and factored into this list. Once all of these questions have been asked and these numbers added together they should be added back to the original number that was tallied based on how much the funeral services would cost. These numbers all added together will give you the exact number needed by you or the insured to know down to the dollar amount of life insurance coverage needed to be insured properly and fully based on your individual needs.
The only accurate way to know exactly how much life insurance you need is by completing a formal or informal needs assessment. Once the need assessment has been completed, almost all guess work on how much life insurance is needed will be eliminated and the proper insurance coverage can be obtained. In most cases the amount genuinely wanted to accomplish all of the goals the insured would like is not normally within budget. That is fine. The insured now has a good idea of what is realistic and what is not and most importantly they can purchase the coverage that they truly need with a clearer representation of what can be accomplished with what they can afford and what they may need to change around in their family life and outlook on life in general.