Don't buy life insurance without first having a needs analysis done.

If you pick a random number out of the air, it may not be enough for your survivors to manage after your death. Or, it could be too high and the insurance company won't sell you a policy that makes you worth more dead than alive.

You can find a number of online calculators to help you with your needs analysis.

The online calculators are a good starting point, but speak with a life insurance agent or a financial planner to customize the analysis for your situation.

Figuring your worth

A good needs analysis will consider:

  • Your age.
  • Your marital status.
  • How many children you have and their ages.
  • How much you earn.
  • The value of your employee benefits.
  • The size of your mortgage.
  • Your level of debt, such as car payments and tuition loans.
  • How much you spend on personal items such as clothing, transportation and entertainment. (This amount will be subtracted from the total because your family won't need to replace these items once you are gone.)
  • The age you plan to retire.
  • Your other savings and retirement benefits.

Consider is the value of what you provide for your family. Do you chauffeur the kids? Do you cut the lawn? Do you do the family's taxes? Will your survivors have to pay someone to do these things and how much will it cost them?

Experts also suggest weighing the cost of sending your children to college and factoring that number into the coverage you buy.

Getting the life insurance number right

Be honest with your answers. If your input is faulty, your output will be as well.

Once you decide upon a life insurance amount, talk to several agents. That way you can compare their life insurance quotes and determine which policy is the best for you and your family.

When you're ready to buy, look at your options -- term life insurance, permanent life insurance or a combination of types.

Every so often, go back and do another needs analysis. You may need to update your policies especially if circumstances change, such as having another child, changing jobs, or seeing one of your children graduate from college.