Use Worksheet 8.1. Brett Hardesty, 43, is a recently divorced father of two children, ages 9 and 7. He currently earns $95,000 a year as an operations manager for a utility company. The divorce settlement requires him to pay $1,500 a month in child support and $400 a month in alimony to his ex-wife, who currently earns $25,000 annually as a preschool teacher. Brett is now renting an apartment, and the divorce settlement left him with about $100,000 in savings and retirement benefits. His employer provides a $75,000 life insurance policy. Brett’s ex-wife is currently the beneficiary listed on the policy. What advice would you give to Brett? What factors should he consider in deciding whether to buy additional life insurance at this point in his life? If he does need additional life insurance, what type of policy or policies should he buy? Use Worksheet 8.1 to help answer these questions for Brett.

Worksheet 8.1

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LIFE INSURANCE NEEDS ANALYSIS METHOD Insured's Name Harry and Denise Klauder Step 1: Financial resources needed after death 1. Annual living expenses and other needs: Monthly living expenses Net yearly income needed a. b. (a x 12) C. d. Number of years in time period Total living need per time period (bx c) TOTAL LIVING EXPENSES (add line d for each 2. Special needs a. b. C. Spouse education fund Children's college fund Other needs 3. Final expenses (funeral, estate costs, etc.) 4. Debt liquidation Date April 12, 2010 $ 36,000 $ 33,000 $ Period 1 3,500 $ 42,000 Period 2 Period 3 $ 3,000 $ 2,750 12 18 22 $ 648,000 $ 726,000 $ 1,878,000 $ 504,000 period): $ 25,000 $ 75,000 0 $ 15,000 a. House mortgage b. Other loans C. Total debt (4 a +4 b) $ 150,000 5,000 $ 155,000 5. Other financial needs TOTAL FINANCIAL RESOURCES NEEDED (add right column) Step 2: Financial resources available after death 1. Income a. Annual Social Security survivor's benefits b. C. Surviving spouse's annual income Other annual pensions and Social Security benefits Period 1 $ 38,400 Period 2 0 Period 3 0 0 $ 35,000 0 0 0 $ 27,000 $ 38,400 $ 35,000 $27,000 12 18 22 $ 460,800 $ 630,000 $ 594,000 Number of years in time period d. Annual income e. f. Total period income (dx e) g. TOTAL INCOME Savings and investments 2. 3. Other life insurance 4. Other resources TOTAL FINANCIAL RESOURCES AVAILABLE (1g+2+3+4) Step 3: Additional Life Insurance needed Step 1: Total financial resources needed Step 2: Total financial resources available ADDITIONAL LIFE INSURANCE NEEDED 0 $ 2,148,000 $ 1,684,800 $ 65,000 $ 100,000 0 $ 1,849,800 $ 2,148,000 $ 1,849,800 $ 298,200