A income and expense needs analysis helps to project the income you (the insured) will earn between now and retirement. In addition, it calculates your net contribution to your family's current standard of living. This helps you determine how much life insurance you should have available in the event the need arises.
To conduct your income and expense needs analysis, start by gathering personal information including: Age, Income and Assumptions, Immediate Cash Needs, Long-Term Income Needs and Available Resources to apply towards your needs assessment. You will then want to take the following steps.
- Evaluate your family’s current living expenses and future needs.
- Gather your personal and financial information.
- Estimate what each of your family members would need to meet current and future financial obligations.
- Subtracting your present value of future tax payments and living expenses from your present earnings.
- Comparing the net contribution with the pending needs of potential survivors.
- Including mortgage payments, household expenses and other special expenses.
- The amount of annual income needed to replace your earnings
- Your age and income has a direct bearing on life insurance needs
- The number of years that the current income will be needed
- Other anticipated expenses:
- The amount of yearly income needed
- Funeral and final expenses
- Retirement needs
- Special needs for children or other family members
- The average annual return on your investments
- The expected average annual rate of inflation