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Determining Your Needs

You know you need life insurance, and that’s a great first step. But how do you know if you need $250,000, $500,000 or more in coverage? A Life Insurance Needs Analysis will help you figure it out.

Step 1

The first thing you need to do is estimate how much money your loved ones would need if you were suddenly gone and could no longer provide for them. Financial needs generally fall into the following 3 categories:

Immediate Needs: These are items that need to be paid for 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 to pay off debts such as credit cards bills, car loans and even the mortgage. 

Ongoing Needs: When you die, your family loses both you and your financial contribution to the household. Life insurance proceeds are often used as a source of replacement income, helping to pay for everyday living expenses for a period of time (e.g., 5, 10 or 15 years).  

Future Needs: Life insurance money can also be used to pre-fund future expenses such as a college education for a child or a secure retirement for a spouse.

Step 2

The next step is to add up all of the resources that are in place to meet your family’s financial needs. For instance, your spouse or partner may be an income earner. Rental income, investment income or a fixed pension benefit are other resources that might be available to your family. Also, you might already own some life insurance and hopefully you have some savings as well (e.g., bank accounts, stocks, bonds, mutual funds, CDs, etc). All of these resources will lessen your need for life insurance.

Step 3

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

Life Insurance Needed -Determine Your Needs

We make it easy for you to conduct your own Life Insurance Needs Analysis. Simply use our Life Insurance Needs Calculator. It only takes about 2 minutes to get an estimate of your needs.

For a more thorough assessment, we encourage you to call one of our licensed insurance professionals. In addition to assessing your needs, they’ll provide you with quotes and can help you begin the process of applying for coverage. 

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