Life insurance is top of mind for many people this year. According to the 2021 Life Insurance Barometer Study by worldwide research and consulting company LIMRA and the nonprofit Life Happens, 36 percent of respondents planned to purchase a policy this yearthe highest percentage in the surveys 11-year history.
However, 53 percent of people surveyed also said they werent sure what type of coverage they needed, or how much. Fortunately, those questions can be answered with a life insurance needs analysis, a tool that helps people figure out how much coverage they should have.
Agents conduct these analyses over the phone or in person, and they usually take no more than 5 to 10 minutes. Theyre usually free, and you typically dont have to be an insurers customer to get one.
In a needs analysis, an agent will ask questions about your income, your spouses income, your retirement savings, and, if you have school-age children, your college-funding needs. Theyll also ask about your debthouse, car, student loans, and credit cards, for exampleand any long-term expenses you might have, such as a child with special needs.
With the answers to these questions, the agent will put together a rough estimate of the coverage youll likely need for your dependents to have enough money to maintain their standard of living if you were to die unexpectedly, allowing them to pay the bills, cover funeral expenses, and fund college costs.
Obviously, you should do a needs analysis before you buy life insurance for the first time. But even if youve had a policy for years, you could still benefit from one, especially if you havent looked at your coverage in a long time.
For instance, if youve recently purchased a home, you probably need to update your life insurance so that your family could pay the mortgage and remain in the home without your income. You might also need to update when you change jobs, if your income increases.
Sometimes, an analysis can even help reduce your life insurance costs. Once your children are through college, for example, you might be able to reduce some of your coverage. As with all types of insurance, your needs change as you age, and your agent can help you figure out whats right for you.