BANGALORE: No one likes to think about life insurance coverage and determining the amount you need as it would be a daunting task. Every person's situation is different and coverage needs are based on many factors such as age, financial health, and number of dependents. Some might recommend buying only enough life insurance to cover present debts.

Below are five steps to help you in calculating the amount of life insurance you should purchase:

1. Add up all of your short-term needs

These short term needs can be placed into three categories: final expenses, outstanding debts and emergency expenses. Among final expenses are medical, hospital and executor fees, probate court costs, and any outstanding taxes that would need to be paid if you died. Among typical outstanding debts are credit card balances, auto loans, college loans, and all other outstanding bills. Emergency expenses should include a cash reserve for medical emergencies and repairs to your home or car.

Calculating final and emergency expenses can be complicated, because you don't have a crystal ball that tells you how much your medical or hospital expenses will be, or even if you will have any.

2. Add up long term obligations

These obligations include your mortgage and college tuition. Calculating an education fund is tricky because you have no idea where your children will be going to college. Perhaps the best method is to use the present average college cost in the United States and the number of years away your children are from entering college.