The Importance of an Insurance Analysis

The decision to buy insurance to protect against a certain risk is usually based on some determination that there aren't sufficient personal resources to cover the resulting financial loss. An insurance analysis is the only way to properly assess your financial situation to determine how much, if any, of the risk you are able to assume, and how much of it should be transferred to an insurance company. A loss of income due to a premature death or disability will usually require a significant amount of capital in order to replace it.

An insurance analysis will quantify the capital need and then calculate the gap between personal resources and the potential need. Only in this way, can you be assured that you are purchasing the right amount of coverage. With so much at stake, you don't want to buy too little coverage, and, if you're like most people, you also don't want to buy more coverage than you need. The analysis will also help you pinpoint the right kind of insurance based on your budget and your preferences.

A complete insurance analysis will also ensure that you have your greatest risks covered. While most people own some form of life insurance for protection against the risk of dying too soon, relatively few are protected against the more certain risk of becoming disabled. Between the age of 35 and 65 every adult faces a one in seven chance of becoming disabled and unable to work due to a prolonged illness or accident. The loss of income due to a disability is one of the leading causes of bankruptcies.

For seniors, there is a four in ten chance that they will require some form of nursing care which, at the current rate, will become prohibitively expensive or even unavailable for most people. An analysis will enable you to see exactly what kind of financial exposure you face if these risks are not covered.

The other certainty of life is change. Our financial and family situations will evolve; we will age; and, eventually our health will decline. And, as life unfolds, our needs and risks change. With some major life event occurring, on average, every three years for most people, it is essential to have a complete insurance analysis with the same frequency.

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Copyright © 2011 AdvisorNet Communications Inc. All rights reserved. This article is provided for informational purposes only and is based on the perspectives and opinions of the owners and writers only. The information provided is not intended to provide specific financial advice. It is strongly recommended that the reader seek qualified professional advice before making any financial decisions based on anything discussed in this article. This article is not to be copied or republished in any format for any reason without the written permission of the AdvisorNet Communications. The publisher does not guarantee the accuracy of the information and is not liable in any way for any error or omission.