Life Valuation Techniques

The loss of income at the death of the primary wage earner can be devastating to those left behind. This is especially true when dependent children are involved.

The impact of September 11, 2001 redefined the attitudes of thousands of family victums about the value of human life when it became necessary for the U.S. Department of Justice to try and define victum compensation.

Their findings were that a married individual with two children should carry life insurance protection equal to approximately 20 times their annual income. Lower amounts were defined for those with no children and for those who were single.

What about you?  How much are you worth to your loved ones?  For example, if you currently earn $60,000 each year, would $1,200,000 of life insurance death proceeds (60,000 x 20) be sufficient to take care of your spouse and two children?

One way to help answer this question is to try and identify some of the cash needs your family will have when you die:

• Final Expenses - the amount of cash required to pay for a person's last illness and funeral costs.
• Emergency Fund - used to pay for unexpected events that occur from time to time (eg. home repairs, medical bills, etc.)
• Outstanding Debts - required to pay off such things as the deceased's credit card balances.
• Tax Obligations - needed to pay federal, state and estate taxes.
• Mortgage - this is typically the largest expense a family incurs on a monthly basis.

Everyone's situation is unique. There are subtle differences that can impact individual financial needs and choices. Calculators do not provide financial advice... but they can provide you with a general estimation of your life insurance needs.

Here's a great tool to help you estimate your human life value. Give careful thought when you fill in the blanks and the result will provide a basis upon which you can begin to make a decision about how much life insurance you really need.

But, before reaching a decision about product type, make sure you have a complete understanding of the life insurance policy.