2. How much life insurance do you need? Calculating needs - Parti Patrick and Stasia Strong are 40 years old and have one daughter, age 10. Patrick is the primary carnet, making $65,000 per year. Stasia does not currently work, The Strongs have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Stasia and their daughter in the event of Patrick's death. Patrick and Stasia estimate that while their daughter is still living at home, monthly living expenses for Stasia and their child will be about $2,900 (in current dollars). After their daughter leaves for college in 8 years, Stasia will need a monthly income of $2,000 until she retires at age 65. The Strongs estimate Stasia's living expenses after 65 will only be $2,000 a month. The life expectancy of a woman Stasia's age is 87 years, so the strong family calculates that Stasia 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 ols Name of insured Date Patrick and Stasia Strong July 31, 2015 Step 1: Financial resources needed after death 1. Annual living expenses and other needs Period 2 Period 3 Period 1 $2,900 10 t. Monthly living expenses Net yearly income needed (1a x 123 Number of years in time period Total living needs per time period (ib x 10) 12 22 d 5 51336,500 Total living expenses (add line 1d Tor each period to check your In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Stasia worked as a software engineet, but her knowledge and skills are now somewhat outdated. Therefore, they include $20,000 for Stasia to go back to school. Additionally, Patrick and Stasia 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 home improvements of $150,000 and a credit card balance of $1,800. They own their home but still have an outstanding mortgage of $400,000. a a. b. C 3 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 (48 + 46) 5 Other financial needs Total financial resources needed (add right hand column plus the Total Living Expenses you calculated): ILI O 4 a C. b. C. $0 Tools 15 3. 4. Child's college fund Other noods 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): $ b. s C IS $0 5 5 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 Strongs should purchase, they need to factor in additional Information he True or False: Patrick's future salary Git he does not die) should be accounted for in the remaining portion of the form. True False 2. How much life insurance do you need? Calculating needs - Parti Patrick and Stasia Strong are 40 years old and have one daughter, age 10. Patrick is the primary carnet, making $65,000 per year. Stasia does not currently work, The Strongs have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Stasia and their daughter in the event of Patrick's death. Patrick and Stasia estimate that while their daughter is still living at home, monthly living expenses for Stasia and their child will be about $2,900 (in current dollars). After their daughter leaves for college in 8 years, Stasia will need a monthly income of $2,000 until she retires at age 65. The Strongs estimate Stasia's living expenses after 65 will only be $2,000 a month. The life expectancy of a woman Stasia's age is 87 years, so the strong family calculates that Stasia 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 ols Name of insured Date Patrick and Stasia Strong July 31, 2015 Step 1: Financial resources needed after death 1. Annual living expenses and other needs Period 2 Period 3 Period 1 $2,900 10 t. Monthly living expenses Net yearly income needed (1a x 123 Number of years in time period Total living needs per time period (ib x 10) 12 22 d 5 51336,500 Total living expenses (add line 1d Tor each period to check your In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Stasia worked as a software engineet, but her knowledge and skills are now somewhat outdated. Therefore, they include $20,000 for Stasia to go back to school. Additionally, Patrick and Stasia 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 home improvements of $150,000 and a credit card balance of $1,800. They own their home but still have an outstanding mortgage of $400,000. a a. b. C 3 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 (48 + 46) 5 Other financial needs Total financial resources needed (add right hand column plus the Total Living Expenses you calculated): ILI O 4 a C. b. C. $0 Tools 15 3. 4. Child's college fund Other noods 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): $ b. s C IS $0 5 5 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 Strongs should purchase, they need to factor in additional Information he True or False: Patrick's future salary Git he does not die) should be accounted for in the remaining portion of the form. True False
