One of the most common questions when purchasing life insurance is, “How much is enough?” A needs analysis is a starting point to answering this question. A needs analysis examines your specific financial and personal situation to help you determine the type and amount of life insurance that will best satisfy your needs.
One of the first decisions you will have to make when purchasing life insurance is whether to choose term or permanent coverage.
Term life insurance can offer coverage for up to 30 years or longer, and is often purchased to provide funds for short-term financial obligations such as a mortgage or a child’s tuition in case the insured dies.
Permanent life insurance, which includes whole life and universal life policies, generally provides coverage throughout a person’s life. Unlike term insurance, a permanent life policy may gradually accumulate a cash value, which you may be able to borrow against while the policy is still active or cash in upon surrender of the policy.
Determining the right amount of coverage requires a solid understanding of all your policy options as well as your financial needs and goals.
A needs analysis seeks answers to questions like: What are my family’s immediate and future income needs? How much supplemental income will they need to meet expenses if I were to die tomorrow?
Your roles as a spouse, grandparent, stay-at-home parent or small business owner mean you have specific needs. If you have not purchased life insurance yet, consider sitting down with an insurance agent to discuss your situation and options. If you already have a policy, discuss with your agent if it’s still appropriate for your present situation and any lifestyle changes that may be on the horizon.
Visit www.amfam.com to find a Life Needs Calculator, or www.lifehappens.org/insurance-overview/life-insurance/calculate-your-needs/ if you prefer a non-commercial site, to help you determine individual life insurance coverage needs and to learn more about the entire portfolio of life insurance products offered by American Family Life Insurance Company, a member of the American Family Insurance Group.
Greg Perry has been an agent for American Family Insurance since 2013. His office is located at 168 N Johnston St. Suite 203 in Dallas. Greg can be contacted at (678) 363-8655, or www.gregperryagency.com.