What is a life insurance ‘needs analysis’? Do I need one?

A needs analysis lets you put your insurance requirements in perspective. Because the purchase of a life insurance policy is a contract that could very reasonable last the rest of your life, making sure that it will provide financial assistance where and for as much as your family will need. There are many different choices to make, and a needs analysis will help you choose one or more policies that do the things you need them to.

One example would be in trying to decide whether you are best served with a term life insurance policy or by a whole life insurance policy. These two basic types of life insurance are best used for very different applications, such as a term policy paying off the mortgage and a permanent life policy providing the money to pay your final expenses and allow your spouse to move back to the family homeland. The needs analysis shows you where different policies are applicable, and how large the policy should be.

There are a number of factors considered in a needs analysis, including such things as your age, the number of years until you retire, how many dependents you have, and all of the costs associated with your house in any given month. These figures and others give you a surprisingly accurate estimate of what the family would lose, in financial terms, if you w not there to provide for them.

A needs analysis is not a test, and while having one is the best way to plan your insurance needs, you are not obligated to have one. Having one will assist you in future planning, but you will always have the final decision of what you want and need to buy for your family. The purpose is to define the costs associated with keeping your family comfortable long after you are gone, and that is your guide for picking the policies that fit your family.