Adam Modine, 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. Adam 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. Adam?s ex-wife is currently the beneficiary listed on the policy. What advice would you give to Adam? 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 Adam.

LIFE INSURANCE NEEDS ANALYSIS METHOD Insured's Name Date Step 1: Estimate the total economic resources needed 1. Annual living expenses and other needs: Period 1 a. Monthly living expenses b. Net yearly income needed (a 12) c. Number of years in time period d. Total living need per time period (b c) $ $ $ Period 2 - $ $ - $ Period 3 - $ $ - - $ - TOTAL LIVING EXPENSES (add line d for each period): $ - 2. Special needs a. Spouse education fund b. Children's college fund c. Other needs 3. Final expenses (funeral, estate costs, etc.) 4. Debt liquidation a. House mortgage b. Other loans c. Total debt (4 a + 4 b) 5. Other financial needs $ $ $ $ $ $ $ $ $ - $ - g. TOTAL INCOME $ - 2. Savings and investments $ 3. Other life insurance $ 4. Other resources $ TOTAL RESOURCES AVAILABLE (1g + 2 + 3 + 4) $ - Step 1: Total income needs $ - Step 2: Available resources $ - ADDITIONAL LIFE INSURANCE NEEDED $ - TOTAL INCOME NEEDS (add right column) Step 2: Financial resources available after death 1. Income Period 1 a. Annual Social Security survivor benefits b. Surviving spouse's annual income c. Other annual pensions and Soc. Sec. benefits d. Annual income e. Number of years in time period f. Total period income (d e) Period 2 $ $ Period 3 $ - $ - 0 $ - $ - 0 $ - 0 $ - Step 3: Subtract available resources (Step 2) from the amount needed (Step 1)