If you have children who depend on you, college expenses, substantial debts, a family business, or anticipated estate tax liability, you may need life insurance on your own life. Even if you are 60 or even 70 years old, you can still buy life insurance as long as you are reasonably healthy.

The “million dollar” question is whether you need life insurance, and if so, how much. The answer depends on your future economic need, balanced against the cost of insurance. Determining your insurance needs requires a detailed analysis of your current and future expenses as well as your sources of income.

Take for example a surviving spouse with three children, ages 12, 10 and 7. Let’s assume the following additional facts:

1. Annual living expenses are (after tax) $60,000 (food, clothing, auto, insurance, entertainment, and miscellaneous expenses).
2. An income tax rate of 20%.
3. Estimated funeral expenses for the surviving spouse of $10,000.
4. A mortgage balance of $80,000.
5. College funding needed for all children is $100,000.
6. A $20,000 emergency fund.
7. Gross income from the survivor’s employment is $27,000.
8. The family receives $15,000 of Social Security benefits per year.
9. Investments in the amount of $325,000.

Let’s also assume that the family will earn 8% annually on investments, inflation will be 3% per year, and that income is needed for 15 years, taking the youngest child to age 22.

Although $325,000 of investments sounds like a lot of money, and it is, it would not enough to provide for the children if the surviving spouse dies prematurely.

* $75,000 needed, less $42,000 ($27,000 income + $15,000 Social Security).
This amount represents the present value of an increasing income for 15 years.

Even with the $325,000 properly invested (earning an 8% average rate of return), there would be a shortage in the event the surviving spouse in our example dies prematurely.

At the very least, the surviving spouse should purchase term life insurance in the amount of $250,000 for a fifteen-year period. The annual premium for a healthy female in her forties would be less than $1,000 per year.

Moreover, a revocable trust should be created to avoid probate and to manage the spouse’s assets until such time as all of the children are raised and able to manage an outright distribution of their inheritance.