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Determining Your Needs

You’re aware you need life insurance, which is great, because that is the first step. But how do you know how much you’ll need? A Life Insurance Needs Analysis will help you figure it out.

Step 1

The first thing that needs to be done to complete a life insurance needs analysis is an estimation of how much money your loved ones would need in the event you were no longer there to support them. Financial needs generally group into three categories:

Immediate Needs: These are costs that must be taken care of right away, such as funeral expenses, estate settlement costs, and medical bills that weren’t covered by insurance. Life insurance proceeds can also be used towards debts, such as credit cards, car loans, and even mortgages.

Ongoing Needs: When you die, not only does your family lose you, but they also lose your financial contributions to the household. Life insurance proceeds can be used as a supplement or replacement of income, which would help cover everyday living expenses for a period of time.

Future Needs: Life insurance proceeds can also go towards pre-funding future expenses, such as a college education for a child or a secure retirement for a spouse.

Step 2

The next step in an life insurance needs analysis is to review all resources available to meet your family’s financial needs. For example, your spouse may be an income earner. Rental income, investment income, or a fixed pension benefit are other financial resources that can be utilized. Savings can also be utilized (e.g. bank accounts, stocks, bonds, mutual funds, CDs, etc.). All of these financial resources will lessen your need for life insurance.

Step 3

The difference between your family’s financial needs and the resources available to meet those needs is your need for life insurance (see equation below).

Life Insurance Needed -Determine Your Needs

We make it simple to conduct your own Life Insurance Needs analysis. Just use our Life Insurance Needs Calculator. It only takes a few minutes to get an estimate of your financial needs.

For a more detailed assessment of determing your needs for life insurance, we recommend calling one of our licensed insurance professionals. They will provide you with quotes and can help the process of applying for coverage.