2. How much life insurance do you need? Calculating needs - Part 1 Ginny and Larry Stewart are 37 years old and have one daughter, age 5. Ginny is the primary earner, making $87,000 per year. Larry does not currently work. The Stewarts have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Larry and their daughter in the event of Ginny's death. Ginny and Larry estimate that while their daughter is still living at home, monthly living expenses for Larry and their child will be about $3,700 (in current dollars). After their daughter leaves for college in 13 years, Larry will need a monthly income of $3,100 until he retires at age 65. The Stewarts estimate Larry's living expenses after 65 will only be $2,700 a month. The life expectancy of a man Larry's age is 82 years, so the Stewart family calculates that Larry will spend about 17 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 Name of Insured Larry and Ginny Stewart July 31, 2015 Step 1: Financial Resources Needed after Death 1. Annual Living Expenses and Other Needs Period 1 Period 2 Period 3 Period 1 Period 2 Period 3 Monthly living $3,700 expenses Net yearly income needed (1a x 12) Number of years in time period Total living needs per time period (1b x 1c) $1,686,000 Total Living Expenses (add Line id for each period to check your total) In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Larry worked as a financial consultant, but his knowledge and skills are now somewhat outdated. Therefore, they include $30,000 for Larry to go back to school. Additionally, Ginny and Larry want to create a college fund of $35,000 to fund their child's college education. They estimate that final expenses (funeral costs and estate taxes) will amount to $12,000. Finally, they have taken out a loan for home Improvements of $130,000 and an automobile loan of $5,000. They own their home but still have an outstanding mortgage of $300,000 Using this information, complete the next portion of Step 1 to determine the total financial resources needed: 2. Special Needs Spouse's education fund Child's college fund Other needs Final Expenses (funeral costs and estate taxes) Debt Liquidation House mortgage Other loans Total debt (4a + 4b) Other Financial Needs Total Financial Resources Needed (add right-hand column plus the Total Living Expenses you calculated): $ 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 Stewarts should purchase, they need to factor in additional information. True or Falsa: The value of Ginny's employer-offered life insurance policy should be accounted for in the remaining portion of the form. True False Grad Now Sa Comis