How much life insurance do you need? Calculating needs $-$ Part$1$

Jason and Eleanor Stein are $37$ years old and have one son, age $5.$ Jason is the primary earner, making $$87,000$ per year. Eleanor does not currently

work. The Steins have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Eleanor and

their son in the event of Jason's death.

Jason and Eleanor estimate that while their son is still living at home, monthly living expenses for Eleanor and their child will be about $$3,700($in

current dollars$).$ After their son leaves for college in $13$ years, Eleanor will need a monthly income of $$3,100$ until she retires at age $65.$ The Steins

estimate Eleanor's living expenses after $65$ will only be $$2,700$ a month. The life expectancy of a woman Eleanor's age is $87$ years, so the Stein family

calculates that Eleanor 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

In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Eleanor worked as a financial consultant,

but her knowledge and skills are now somewhat outdated. Therefore, they include $$30,000$ for Eleanor to go back to school. Additionally, Jason and

Eleanor 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 $$12,000.$ Finally, they have taken out a loan for a business venture of $$32,200$ and a credit card balance of $$1,200.$ Because the

Steins are renters, they have no outstanding mortgage.

Using this information, complete the next portion of Step $1$ to determine the total financial resources needed.

Special needs

a$.$ Spouse's education fund

b$.$ Child's college fund

c$.$ Other needs

Final expenses $($funeral costs and estate taxes$)$

Debt liquidation

a$.$ House mortgage

b$.$ Other loans

c$.$ 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 Steins should purchase, they need to factor in additional information.

True or False: Jason's future salary $($if he does not die$)$ should be accounted for in the remaining portion of the form.

True

False