Guest Author - Cate Brizzell

Mortality isn't exactly something we like to think about on a regular basis. But if you have dependents, either a spouse or children or both, it's imperative that you protect them financially in the (hopefully) remote event of your untimely passing.

Working couples who are also parents need to calculate three scenarios: each spouse passing with the other surviving, and both spouses passing at the same time.

Begin by calculating any short-term needs that would arise. Include funeral expenses, housekeeping, day care or education. For example, if a stay-at-home mom should pass away, a working dad might need to arrange for day care and housekeeping.

Then consider living expenses and how long they will last. Would a surviving spouse or your children's guardian use the proceeds of your life insurance to pay off debt? Once debt is paid off, what would your family's living expenses be? How long would those expenses need to be paid? Will your spouse have retirement funds to offset future living expenses? For example, let's say you currently earn $50,000 and your wife stays home with the kids. You have $275,000 in debt. If you were to pass away, and your insurance paid off the $275,00, what would your new family budget look like?

Finally, add in one-time expenses that you were planning on covering. College education, weddings, home improvements, new cars for yourself and/or the kids, and so on. How much will those items cost, in future dollars? (For a future dollar calculation, take one plus the rate of inflation to a power equal to the number of years before the expense comes due, then multiply by the current dollar value. For example, a $20,000 college bill will be $24,310 four years from now with a 5% rate of inflation: $20,000 X (1.05)4th power.)

Total up the short-term needs, living expenses and one-time future expenditures. Subtract any liquid funds you may have, not including retirement funds. The difference is the amount of insurance you'll need to purchase.

A good online calculator to walk you through this process can be found at Bankrate.com.

Don't be intimidated if the number seems high. Shop around for insurance premiums. The internet is a good source, but then again, so is a trusted financial advisor. We found two 20-year term policies for $1,000,000 and $500,000 with a very reputable insurer for around $500 a year.

Speaking of term policies, which is better: term, or whole life? I have rarely seen whole life policies recommended by financial experts. Term policies, especially 20-year, are usually more economical.

Something else to consider: life insurance trusts. With an irrevocable trust, your life insurance proceeds are not considered part of your estate. Therefore, they are not subject to estate taxes. If President Bush's tax cuts aren't made permanent, estate taxes will again be levied on estates of $1 million or more. That sounds like a lot, but once you have a home and other assets, and if you pass away at a relatively young age with adequate coverage, your estate could easily surpass that.

Of course, you hope the worst will never happen. But if it does, a few moments spent planning now will mean your loved ones can focus on their grief (and each other) instead of having to worry about financial security.