Life insurance is an important part of estate planning for the majority of people in the United States. Although life insurance is not necessary for everyone, anyone who is relied upon for support by family members or others, such as dependent children, spouses, or a disabled adult or child, should consider investing in a life insurance plan.

Individuals with no dependents who have sufficient assets to cover outstanding debts and funeral expenses do not necessarily need life insurance. Those individuals who do have dependents, but are already in possession of sufficient assets for providing for them after their death, may not need life insurance, either.

The first step to obtaining a life insurance policy is determining what amount of money your dependents will need upon your death. Things to consider include the total amount of your current debt, what it will take to replace your current annual income, and future obligations, such as college tuition or the cost of a move to another city upon retirement.

In the event of your death, your life insurance should be adequate to pay all debts in full, including car loans, credit cards, mortgages, and other loans.

Income replacement will be a major determinate in figuring the size of your life insurance policy. Your policy will need to be large enough to replace your income plus a little extra for inflation.

An important point to remember is that the number one mistake made by a large number of investors is buying a policy that is too low to adequately cover immediate and future needs. Assess your family’s needs carefully and then buy accordingly, for peace of mind.

A person should buy life insurance if someone else depends on their income. Life insurance then provides a financial cushion for the dependents who are now suddenly without their source of income. Life insurance can also help cover the costs for the funeral and medical bills that may have accumulated after an accident or illness.

The more life insurance you want to buy, however, the more rigorously the life insurance companies will look into your medical history and your extracurricular activities. Life insurance companies do not want to write million dollar policies on somebody who is a sky diver, scuba diver, or even a rodeo clown because these are considered high risk activities. If they write a big policy on you and you die a few months later, they have lost a lot of money.

They will also look much more aggressively into your medical history and ask more medical tests of you. Once again, this is because they want to make sure you pay plenty of premiums before there is any known risk of you dying. They are in business to make money too.

A good life insurance agent will help you calculate an amount that is appropriate to take care of those who depend on you in the event of your death, and will also help you arrive at an amount for a policy that the life insurance company underwriters will approve too.