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A life insurance needs analysis is a first step toward peace of mind

Photo by bnenin/ Photo by bnenin/

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 year—the highest percentage in the survey’s 11-year history.

However, 53 percent of people surveyed also said they weren’t 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. They’re usually free, and you typically don’t have to be an insurer’s customer to get one.

In a needs analysis, an agent will ask questions about your income, your spouse’s income, your retirement savings, and, if you have school-age children, your college-funding needs. They’ll also ask about your debt—house, car, student loans, and credit cards, for example—and 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 you’ll 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 you’ve had a policy for years, you could still benefit from one, especially if you haven’t looked at your coverage in a long time.

For instance, if you’ve 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 what’s right for you.

Ask an agent

Question: Do I need a medical exam to purchase life insurance?

Answer: Not necessarily. Some insurance companies now use simplified or accelerated underwriting, in which they take publicly available data and use it to determine your eligibility for coverage.

That means you can go through the entire process and obtain a policy with just a phone call. —Adelaine Chen, AAA life insurance specialist, Woodland Hills, California, branch.

Your AAA life insurance specialist can provide more info. Visit a branch, call (877) 699-3768, or go to AAA life insurance specialists do not provide legal, tax, or financial advice.

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