When people do make the decision to buy life insurance, many tend to agonize over how much coverage to buy. Unfortunately, many people take the expedient route and simply guess or use some antiquated formula, such as “10 times salary”. The sad truth is that the average amount of life insurance owned by households is only sufficient to provide for a family’s needs for four years.

No one wants to buy more life insurance than they need, but what’s the point of buying it at all if it won’t serve your needs. The better approach is to base it on your actual needs – a combination of immediate cash needs - to pay off debt, pay for final expenses and set up funding mechanisms for future goals, such as college expenses; and capital needs which is, essentially, the capital required to produce a stream of income your family will need, factored for inflation to maintain their current life style for as long as it is needed.

Using a simple financial needs calculator available online, it will take only a few minutes to list and prioritize your family’s needs and determine the gap that exists between what you currently have to provide for their needs and what you will need in additional protection.