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Have you ever wondered how much life insurance is really enough? Is there an urge to get more coverage because your worth is going up day by day? How about your investments? Where do they fit into the picture?

This article will solve your problems once and for all, regarding how much life insurance you really need, who it applies to and how you go about deciding, with or without the help of a financial expert.

With all the instability in the world, people from all walks of life, be it economic status or any other status, they require life insurance to protect their ability to earn an income.

The areas of uncertainty to focus will be premature death, disability and living too long though some would find that as a good problem. I belong to that category.

After years of research and paperwork, there is one way to find out the amount of life insurance needed to replace the income earnings. That is to multiply the yearly income by a number (researched). To replace five years of income, multiply annual income by 4.5. For ten years, the factor is 8.5. For twenty years, it's about 15. There is some uncertainty in this method but I have to agree it saves me a lot of time.

There is another method which is equally easy and more accurate based on what you really need, regardless of your future net worth. This method is also to prevent a person from putting aside excessive or too little money for life insurance. The method involves five steps.

1) Find out the total amount of available financial resources
Calculate the total amount of investments paid up, existing life insurance arrangements, sources of income, social security benefits, if applicable in your country as well as savings (minus three months of your average monthly spending).

2) Estimate the amount of money spent per year
Find out the amount of money you need to spend every year, including the bills, transportation fees, food, children's expenses, mortgage or rent, all borne by yourself. For instance, if you share by half your children's expenses with your wife, insert half your children's expenses into the total amount.

3) Find out the number of years your family will be able to rely without your income
Divide the existing resources available as discussed, by the total expenses per year. That will be the number of years your family can do without your income, should something unfortunate happen.

4) Calculate the number of years remaining to support your loved ones
Add this figure, to each of your main dependants' individual age. This will be figure "A" (Note that figure "A" refers to the figure calculated for only one of the major dependant, for easy explanation). Decide the average life expectancy for parents or spouse, and the coming of age for children. Usually, for boys, it is 25 and for girls, it's 22, the difference due to the need for military training in some countries.

Subtract figure "A" from the life expectancy or the coming of age of the specific person. This will be the figure required for this step.

5) Shortfall amount = life insurance amount required
Multiply the figure calculated in step 4 by the yearly expenses in step 2. That will be amount of shortfall to be replaced by life insurance, which is also the coverage needed.
Now that you know how to calculate the right amount of life insurance required, the only thing standing in the way is procrastination. Like food which is a basic need, one must have sufficient insurance so that he or she can live life happily without any worries or regret.

Benji is a Financial Consultant based in Singapore.He can be contacted via email at benfoo33@hotmail.com