2. How much life insurance do you need? Calculating needs - Part 1 Rajiv and Sunita Malik are 40 years old and have one son, age 10. Rajiv is the primary earner, making $65,000 per year. Sunita does not currently work. The Maliks have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Sunita and their son in the event of Rajiv's death. Rajiv and Sunita estimate that while their son is still living at home, monthly living expenses for Sunita and their child will be about $2,900 (in current dollars). After their son leaves for college in 8 years, Sunita will need a monthly income of $2,600 until she retires at age 65. The Maliks estimate Sunita's living expenses after 65 will only be $2,000 a month. The life expectancy of a woman Sunita's age is 87 years, so the Malik family calculates that Sunita will spend about 22 years in retirement. Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses: Life Insurance Needs Analysis Worksheet Date July 31, 2015 Period 3 a. Name of Insured Rajiv and Sunita Malik Step 1: Financial Resources Needed after Death 1. Annual Living Expenses and Other Needs Period 1 Period 2 Monthly living expenses $2,900 Net yearly income needed (1a x 12) Number of years in time period 8 17 Total living needs per time period (16 x $ 10) Total Living Expenses (add Line 1d for each period to check your total): $ $ 22 $1,336,800 In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Sunita worked as a real estate agent, but her knowledge and skills are now somewhat outdated. Therefore, they include $20,000 for Sunita to go back to school. Additionally, Rajiv and Sunita want to create a college fund of $25,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $10,000. Finally, they have taken out a loan for a business venture of $32,200 and a credit card balance of $1,200. Because the Maliks are renters, they have no outstanding mortgage. Using this information, complete the next portion of Step 1 to determine the total financial resources needed: $0 2. Special Needs a. Spouse's education fund b. Child's college fund C. Other needs 3. Final Expenses (funeral costs and estate taxes) 4. Debt Liquidation House mortgage b. Other loans C. Total debt (4a + 4b) 5. Other Financial Needs Total Financial Resources Needed (add right-hand column plus the Total Living Expenses you calculated previously to check your math): H $0 $1,425,200 The second half of the needs analysis worksheet is not shown on this page. To complete the worksheet and determine the value of the life insurance policy the Maliks should purchase, they need to factor in additional information. True or False: The value of Rajiv's employer-offered life insurance policy should be accounted for in the remaining portion of the form. True False 2. How much life insurance do you need? Calculating needs - Part 1 Rajiv and Sunita Malik are 40 years old and have one son, age 10. Rajiv is the primary earner, making $65,000 per year. Sunita does not currently work. The Maliks have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Sunita and their son in the event of Rajiv's death. Rajiv and Sunita estimate that while their son is still living at home, monthly living expenses for Sunita and their child will be about $2,900 (in current dollars). After their son leaves for college in 8 years, Sunita will need a monthly income of $2,600 until she retires at age 65. The Maliks estimate Sunita's living expenses after 65 will only be $2,000 a month. The life expectancy of a woman Sunita's age is 87 years, so the Malik family calculates that Sunita will spend about 22 years in retirement. Using this information, complete the first portion of the needs analysis worksheet to estimate their total living expenses: Life Insurance Needs Analysis Worksheet Date July 31, 2015 Period 3 a. Name of Insured Rajiv and Sunita Malik Step 1: Financial Resources Needed after Death 1. Annual Living Expenses and Other Needs Period 1 Period 2 Monthly living expenses $2,900 Net yearly income needed (1a x 12) Number of years in time period 8 17 Total living needs per time period (16 x $ 10) Total Living Expenses (add Line 1d for each period to check your total): $ $ 22 $1,336,800 In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Sunita worked as a real estate agent, but her knowledge and skills are now somewhat outdated. Therefore, they include $20,000 for Sunita to go back to school. Additionally, Rajiv and Sunita want to create a college fund of $25,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $10,000. Finally, they have taken out a loan for a business venture of $32,200 and a credit card balance of $1,200. Because the Maliks are renters, they have no outstanding mortgage. Using this information, complete the next portion of Step 1 to determine the total financial resources needed: $0 2. Special Needs a. Spouse's education fund b. Child's college fund C. Other needs 3. Final Expenses (funeral costs and estate taxes) 4. Debt Liquidation House mortgage b. Other loans C. Total debt (4a + 4b) 5. Other Financial Needs Total Financial Resources Needed (add right-hand column plus the Total Living Expenses you calculated previously to check your math): H $0 $1,425,200 The second half of the needs analysis worksheet is not shown on this page. To complete the worksheet and determine the value of the life insurance policy the Maliks should purchase, they need to factor in additional information. True or False: The value of Rajiv's employer-offered life insurance policy should be accounted for in the remaining portion of the form. True False