Life insurance needs analysis

What is a life insurance needs analysis?

Posted  March 15, 2013

If you are in the market for life insurance you are probably wondering just how much cover you should buy. The answer to your question lies in a life insurance needs analysis.

What is a life insurance needs analysis?A life insurance needs analysis takes into account your current assets and liabilities as well as your existing insurance portfolio, to calculate how much life cover your family will need in the event of your death.

If you think that your salary works hard for you, wait until you see what your life insurance benefit is up against. First off, it needs to cover immediate expenses, for example your funeral expenses and the costs of settling your estate, including any estate taxes. Once these costs are taken care of your debt needs to be paid off. Finally, if you have any dependants, your pay-out needs to take care of their living expenses, education costs and medical expenses.

Why is a needs analysis important?By performing a needs analysis you can ensure that you are not under or even over insured for your particular life stage. It is important to mention life stage because it impacts significantly on your cover amount. For example, a 22 year old without a family needs less life insurance than a married 35 year old with 3 children and elderly parents to look after.

There is no place for guestimates when it comes to calculating your life insurance benefit amount. For breadwinners your life insurance pay-out will provide the funds that your family needs to adjust to the loss of your salary and maintain the standard of living that they were accustomed to. For the young and single, your pay-out will ensure that you do not become a burden to your family in death, leaving behind nothing more than a string of expenses.

When should I do a needs analysis?You should do a needs analysis when you first invest in life insurance, but your responsibilities do not end there. Remember that a needs analysis is based only on your current assets and liabilities. If your life changes in any way your benefit amount will need to change as well. These changes could include the birth of a child, a new house or even a promotion. It is therefore important to do a needs analysis and review your benefit amount every time your financial circumstances change.

How do I go about it?Your Life Insurance Company or personal financial planner will be able to walk you through a needs analysis. If you are looking for a ballpark figure you can also use one of the many life insurance calculators available online.

Beyond life insuranceA needs analysis can also be used to calculate how much disability insurance and dread disease cover you need. It also extends to retirement planning.

Contact 1Life today on 0860 10 53 40 for a free dread disease, disability or life insurance needs analysis or use our online life insurance calculator.

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