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Financial Needs Analysis

A financial needs analysis (FNA) is a detailed assessment used by financial advisors and insurance professionals to evaluate an individual’s or family’s current financial situation and determine the level of protection or investment required to meet their goals. It examines income, expenses, debts, assets, savings, and existing insurance coverage to identify gaps and recommend suitable financial strategies.

In insurance planning, a financial needs analysis helps determine how much life, disability, or critical illness insurance is necessary to maintain a family’s lifestyle and cover financial obligations if the primary earner becomes ill, disabled, or passes away. It can also include planning for retirement, education funding, or estate protection. The analysis provides a personalized roadmap to align financial products with long-term objectives, risk tolerance, and budget.

Example:

If you have a mortgage of $400,000, annual family expenses of $60,000, and existing life insurance of $150,000, a financial needs analysis would show that you may need an additional $400,000 in life insurance coverage to ensure your family’s financial security.

What to Watch For:

Ensure your financial needs analysis is based on current and accurate information. Revisit it regularly or after major life changes such as marriage, home purchase, or business growth. Be wary of one-size-fits-all recommendations - a proper analysis should be comprehensive and tailored to your personal goals, not just focused on product sales.

Related Terms

Life Insurance

Life insurance is a financial protection product that provides a tax-free lump-sum payment, known as a death benefit, to designated beneficiaries when the insured person dies. It is designed to replace income, pay debts, cover final expenses, or provide financial stability for dependents and loved ones. Life insurance helps ensure that family members can maintain their quality of life and meet ongoing financial obligations even after the loss of the primary earner.

Mortality Rate

Mortality rate is a statistical measure that represents the frequency or probability of death within a specific population during a defined period of time. In insurance, it is a key actuarial factor used to determine life insurance premiums, reserves, and the expected financial risk to the insurer. Mortality rates are derived from large-scale data that reflect age, gender, health, lifestyle, and other risk factors, allowing insurers to predict how many people in a given group are likely to die each year.

Accidental Death and Dismemberment Insurance (AD&D)

Accidental Death and Dismemberment Insurance (AD&D) provides a tax-free lump-sum payment if you die or suffer a severe injury as the direct result of an accident. It is designed to offer financial protection for you and your family in the event of an unexpected, accidental injury or loss that causes death, dismemberment, or permanent disability.

Term Life Insurance

Term life insurance provides financial protection for a specific period of time, known as the term, such as 10, 20, or 30 years. If the insured person dies during that period, the insurer pays a tax-free lump-sum death benefit to the designated beneficiary. This type of insurance is designed to provide affordable coverage for temporary needs, such as replacing income, paying off a mortgage, or supporting dependents until financial independence is achieved.

Beneficiary

A beneficiary is the person or entity designated to receive the proceeds or benefits from an insurance policy upon the policyholder’s death or when a covered event occurs. In life insurance, the beneficiary receives the death benefit as a tax-free lump sum. In accidental death and dismemberment (AD&D) insurance, the beneficiary receives payment if the insured person dies as the result of an accident. Beneficiaries can also be designated in certain health or travel plans that include accidental death benefits.

Learn More About Financial Needs Analysis

What Insurance Do I Need and When?

What Insurance Do I Need and When?

Discover essential insurance types for every life stage in Canada. Learn the best times to secure health, travel, disability, critical illness, and life insurance to safeguard your financial future. Get expert guidance from Aeva, your trusted insurance brokerage partner.

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