This is a difficult question considering the fact that your lifestyle is always changing. Individual as well as family needs change any time, it is also the same case with the economic environment that people live in. It is therefore difficult to tell how much life insurance is enough: economic factors like inflation make it even harder to budget for the future.
Who are my dependants and what are their financial needs?
This is an important question when you are planning to buy life insurance: dependents are basically your family members that depend on you financially. Firstly, you want to know that they are financially stable after you are gone and you also want to estimate a life cover amount that would be adequate. This is not easy: you therefore need to consult a life insurance consultant who can give you a guideline on the best cover. Use a financial calculator Based on the information that you provide, a financial calculator can do much work for you. You will be able to calculate the insurance cover you can afford as well as the monthly premium. In order for you to get almost accurate results, you need to provide accurate information, this information include your monthly income, age, monthly expenses and income, number of dependents and interest rates. Life insurance calculators are easy to use, you only need to go online and search for financial calculators. Remember that the answers that you get from your calculator are not accurate: calculators are only used as a guide. You will however be able to plan ahead using the results that you get from your calculator.
Affordability-how much cover do you afford
Criteria of affordability After calculating the amount that you feel should be enough for your family, the main challenge would be whether you can afford the cover. Remember the cover that you get for your life insurance is determined by your income. The best thing would be to choose an insurance plan that has got reasonable coverage, but at the same time is affordable. Estate tax issues When you do your planning, make sure that you take into account estate tax issues. If you own a many assets, then it is important to make sure that your estate is protected. A good financial advisor should be able to tell you about the tax implications on your estate.