Why You Need an Annual Insurance Policy Review and Needs Analysis

Taking an annual look at your insurance needs can provide peace of mind for you and your family—and it can even reveal opportunities for discounts and savings.

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Just as you’d go to the doctor for an annual checkup or perform routine maintenance on your vehicle, having an annual insurance policy review is just as important. This review, which includes a needs analysis and a look at your life insurance needs, can confirm that your current coverage is sufficient for your needs and budget—or it may reveal gaps, allowing you to take action to remedy those.

Reviewing your insurance coverage at least once a year is an excellent idea to help ensure that you, your family and your belongings are all protected. It’s also a good time to make sure that your life insurance adequately protects your family in the event of your death.

You’ll also want to review your insurance coverage when you’ve made a big purchase or experienced a life change, such as:

  • Getting married 
  • Having a child 
  • Buying a home 
  • Receiving an inheritan 
  • Changing jobs or careers 
  • Starting a new business

These are all considered life-changing events, and it’s crucial to make sure your coverage is up to date and provides enough protection for the people and things that matter most to you.

What is an annual insurance policy review?

Simply put: An annual insurance review is a thorough look at your insurance coverage. You’ll want to look extensively at all your insurance policies protecting your family members, home, vehicles and other valuables. It’s a good idea to enlist the help and knowledge of an experienced insurance agent who can provide valuable guidance on which coverages are best for your unique situation.

An annual insurance review is always a good opportunity to sit down with your insurance agent to make sure you understand your current coverage and the exclusions within your policies. It’s an excellent time to verify that you have adequate coverage and limits—and a great time to look ahead and plan for life changes. It’s an opportunity to see if you are eligible for any discounts, too.

Benefits of a life insurance policy review

Evaluating life insurance needs are a critical component of your annual review. Life insurance products have evolved significantly over the last decade, and more and more options are available to fit unique circumstances. Not only are people living longer, but more-advanced medical testing and better and more-accurate medical diagnoses mean people are staying healthier longer. Given these changes, taking advantage of lower premiums and buying a less-expensive policy may be possible, potentially saving you money.

Remember that life insurance payouts are generally not taxable. This means that life insurance can be a practical way to provide a death benefit and monetary support to loved ones after you’ve passed.

You’ll also want to check that your life insurance beneficiary designations are up to date. When you first bought your policy, you probably named your beneficiaries. But there are circumstances and major life events that warrant reviewing your beneficiary selections and making changes if needed:

  • Marriage 
  • Divorce 
  • Birth of children or grandchildren 
  • Marriage or divorce of children 
  • A large inheritance or lottery win

Some people underestimate the amount of life insurance they’ll need. This is among one of the largest financial mistakes you can make. Remember that most people’s incomes will increase over the years, but so will their expenses. While it’s difficult to pinpoint how much your costs may increase over time, a cushion can help your family members maintain their lifestyle and can provide the peace of mind that comes from knowing that you’ll be leaving them in a solid financial position after you’re gone.

Pull quote that states "Remember that life insurance payouts are generally not taxable. This means that life insurance can be a practical way to provide a death benefit and monetary support to loved ones after you've passed."

What is a needs analysis?

As part of your annual review, your AAA insurance agent can use a needs analysis to identify gaps in coverage for your car, life, home, renters, motorcycle, ATV, RV, boat or flood insurance needs. A needs analysis can help identify where additional insurance coverage is needed to make sure that your family, house and material belongings are fully protected and that your coverage aligns with your current needs.

During a needs analysis, your agent will ask questions about your salary, your spouse’s annual income, your retirement savings plan and (if you have school-aged children) your college fund needs. They’ll look at your debt—house, car, student loans and credit cards—and any other long-term expenses to create a recommendation tailored to you and your unique financial situation.

With answers to these difficult questions, an agent can put together an estimate of all of your insurance coverage needs to ensure you, your family and your belongings are all protected.

A needs analysis calculates how much insurance coverage an individual or family requires. A good needs analysis takes into consideration upcoming life events that could affect your immediate, ongoing and expected expenses. 

  • Immediate expenses: These expenses comprise the costs associated with a funeral, a burial and any outstanding medical bills and debt. Typically, people want their families to be financially able to pay for these immediate expenses. 
  • Ongoing and expected expenses: These expenses include the costs associated with your overall financial plan. To begin, you’ll want to consider how long your family would need support and multiply your annual income by that figure. You should also consider the age of your children and provide money to set aside for college, if applicable.

Benefits of a needs analysis

Did you remodel a bathroom or add on to your home? Home renovations like these affect your home’s appraisal value and can cause a gap in homeowners insurance coverage. Perhaps you have a new teenage driver in your family? Make sure your auto insurance adequately covers your child during this all-important coming-of-age time.

If you’ve recently purchased a home, you may need to update your life insurance policy so your family can continue to pay the mortgage and remain in your house without your income. You might also want to check your existing policy if your salary changes or if you get a new job—these situations will also affect your and your family’s financial standing.

Overall, the goal of a needs analysis is to confirm that you’re not overpaying or underpaying on your premiums and that you’re adequately protected.

Sometimes a needs analysis will help reduce the cost of your insurance. For instance, if your children are finished with college, you might be able to reduce some of your life insurance coverage. As with all insurance, your needs change with age—and your insurance agent can help you navigate what’s right for you and tailor your policies to fit your unique needs. 

Get your annual insurance policy review scheduled with a AAA insurance agent

AAA takes pride in helping you protect your peace of mind. An experienced AAA agent can help you navigate these insurance questions and help you identify the right policies and coverage for you. Your coverage needs are as unique as you are, and your AAA agent is standing by today to provide you with an annual insurance policy review and needs analysis to aid you with all your insurance needs.

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