Life Insurance Needs Analysis

Life insurance needs analysis, also known as the needs approach, is a method used to determine how much life insurance you need to allow loved ones left behind to live comfortably. There are many factors to consider when using the needs approach.

Final Expenses

Final expenses are taken into account in the needs analysis. Funeral and burial costs are a minimum of $7,000.

Dependents

Dependents must be taken into consideration. Young children will need to be taken care of financially. College tuition for each child should be included in the total amount of insurance needed.

Spouse

A spouse left behind with a drastic reduction in income should be considered. Even if the deceased spouse did not bring income into the household, there may be the need to pay for childcare.

Debt

Unpaid debt must be added into the needs analysis equation. Mortgages, automobile loans and credit card debt could become a financial burden on loved ones left behind.

Pets

Single people with pets will want to consider what will happen to them in the event of untimely death. If a relative has agreed to take in the pets, some thought should be given to how much it will cost to care for them for the remainder of their natural lives. Veterinary expenses and food can be costly.

References

• MSN.money: How to assess your life insurance needs