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Do I need life cover, how much cover do I need and should I increase my cover over time are three key questions to ask when buying life insurance. A professional financial adviser can help you answer these questions by conducting a financial needs analysis to assess your insurance needs. The role of the financial adviser in insurance is also to review your life cover annually to see that it still meets your needs or if the sum assured should change.
Securing your family's future with a financial needs analysis
Ensuring your family has funds for their living expenses when an income earner passes away is a critical role of life insurance. This amount will change over time as your family changes, such as when you have children. An insurance needs assessment that is accurate and updated when your circumstances change will help you determine the appropriate cover amounts throughout your life.
Understanding a financial needs analysis
A financial needs analysis, or FNA, is a tool advisers use to determine your financial needs, from how much insurance you need to how much to save for your financial goals.
Financial advisers will gather information such as your family circumstances, number and ages of dependants, expenses, as well as your financial goals, to complete an FNA. Using this information, they will perform complex calculations or use specifically designed software, to determine which financial products can help you achieve your goals and meet your insurance and other financial needs.
For example, the management of your insurance portfolio using a financial needs analysis will require your adviser to determine how much cover your family needs to maintain their standard of living in the years to come. This will be calculated using current income and expenses.
The key factors used in an FNA are:
- Income, current and future
- Expenses, current and future, which includes debt repayments
- Financial goals, such as owning a second home, retiring at age 60 with financial stability
Your financial adviser will also review your financial needs analysis annually to ensure your financial products and life insurance are still meeting your needs, which will change over time. Based on this review they will recommend updating a policy or sum assured amount. The insurance portfolio management section of the FNA will identify if there are gaps in your life insurance, such as whether or not you are underinsured.
The role of a financial adviser in a financial needs analysis
You can complete an FNA online, in your own time, using information requested by the program. The outcomes and suggestions from these FNAs are a good guide, but they don’t always include or make allowances for your particular needs and circumstances. For example, an online FNA may allow for expenses to increase by 5% each year, whereas your expenses may rise by around 8% per year! They may also average out salary increases, which may or may not be granted!
For these reasons, a personal financial needs analysis conducted by a licenced financial adviser or certified financial planner will give you a far more accurate assessment of your needs. Financial advisers have the expertise and experience to know how to accurately determine future needs and financial goals, and have an insight into you and your family. Importantly, a financial adviser can also take affordability into account and make sure recommendations are within your budget.
FNAs aren’t only useful for insurance needs assessments, they also show how much you need to save and invest to achieve other financial goals. Your financial adviser can offer you a personal and comprehensive financial plan, advising on insurance and investments that will grow your generational wealth.
Why regular updates are crucial
Your needs change over the years, as do your financial goals. You may get married or divorced, have children, help your children establish their own homes, and your income will change, as will your expenses. All of these affect how much insurance you need. To make sure these changes reflect in your financial plans, your financial needs analysis should be reviewed at least once a year, and when a major life change happens.
How 1Life Insurance can help
1Life Insurance offers a range of flexible life cover policies that you can tailor to your needs and budget. You can take life cover for a sum assured of between R300 000 and R10 million at a competitive premium. Our 1Life Insurance calculators help you decide how much cover you need, and a professional financial adviser can assist you with a comprehensive financial needs analysis and insurance needs assessment. 1Life Insurance aims to change your loved one's lives for the better by making life cover easy to take out, easy to manage and easy to claim on! We are committed to transparency and meeting the needs of our policyholders. Talk to a skilled 1Life Insurance consultant today!
Ensuring comprehensive coverage with expert guidance
Regularly reviewing and updating your life insurance using a financial needs analysis is key to maintaining adequate protection for your family’s future. By understanding your current and future needs, you can ensure that your coverage remains relevant. Engaging with a financial adviser can provide valuable insights and personalised advice, helping you navigate complex financial products and address any gaps in your coverage. Take the first step towards securing your family's financial well-being by contacting 1Life Insurance for a comprehensive financial and insurance needs assessment and professional advice.