Protect your family financial for the unexpected.

Protecting Your Family: Capital Analysis vs. Financial Needs Analysis 

It Won’t Happen to Me

Preparing for the unexpected is one of the greatest gifts you can give your loved ones. If your family relies on your income, and something were to happen to you without a protection plan, they’d be scrambling to manage a new financial reality. Identifying their potential financial needs and putting an insurance strategy in place can make a difference in your family’s quality of life and future well-being.  

It’s easy to get caught up in day-to-day responsibilities and put financial protection strategies on the back burner or assume “it won’t happen to me.”  Taking a few steps to analyze and then cover your family’s needs can provide you with peace of mind and potentially give your family a life-changing benefit in the future.  

There are two analysis methods to help you determine how much you need to cover their needs in case of the unexpected: Capital Analysis and Financial Needs Analysis.  

Capital Analysis

A Capital Analysis helps determine your family’s income needs and what coverage you’d need to continue to provide this income. It outlines income sources, including current salary or earnings, non-salary income, Social Security, and income-producing assets like real estate investments and stocks. It also outlines your family’s income needs and goals, such as mortgage payments, monthly bills, educational expenses, debts, etc. This analysis also factors income needs for future events, like the costs of a college education down the road or care for an elderly parent, and an inflation-adjusted earnings rate. The final calculation is the capital you’d need to replace your income and provide for future income needs.  

Financial Needs Analysis

A Financial Needs Analysis is a more detailed look at your family’s immediate and longer-term needs if something happens to you. For example, within days of an unexpected passing, your family could face costs associated with a funeral and burial, airline tickets for relatives, final medical bills, outstanding credit card payments and other debts, and more.  These immediate needs can add up to a mountain of new expenses for your family when they’re also experiencing shock and grief. Your family would need liquid assets to cover these costs in the event of your death.   

A Financial Needs Analysis calculates your short- and long-term financial needs, obligations, and liquid assets. Like a Capital Analysis, it considers your income sources and calculates the difference between income sources and needs to help determine gaps. Traditionally, life insurance analyses cover needs and not nice-to-haves like a second home, but you could consider wants and wishes in your analysis, particularly if there is something you’d want to see your family be able to carry out even if you were no longer there.  

For more information on these analysis methods and solutions for individuals, families and business owners, contact Alana.

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