Jacob and Sharon Klein are 52 years old and have one son, age 14. Jacob is the primary earner, making $80,000 per year. Sharon does not currently work. The Kleins have decided to use the needs analysis method to calculate the value of a life insurance policy that would provide for Sharon and their son in the event of Jacobs death.

Jacob and Sharon estimate that while their son is still living at home, monthly living expenses for Sharon and their child will be about $3,300 (in current dollars). After their son leaves for college in 4 years, Sharon will need a monthly income of $2,750 until she retires at age 65. The Kleins estimate Sharons living expenses after 65 will only be $2,300 a month. The life expectancy of a woman Sharons age is 87 years, so the Klein family calculates that Sharon 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

Name of insured	Jacob and Sharon Klein			Date	July 31, 2015
Step 1: Financial resources needed after death
1. Annual living expenses and other needs
		Period 1	Period 2	Period 3
a.	Monthly living expenses	$3,300
b.	Net yearly income needed (1a x 12)
c.	Number of years in time period	4	9	22
d.	Total living needs per time period (1b x 1c)
				Total living expenses (add Line 1d for each period to check your total):	$1,062,600

In addition to these monthly expenses, other future outlays must be accounted for. Before they had a child, Sharon worked as a financial consultant, but her knowledge and skills are now somewhat outdated. Therefore, they include $25,000 for Sharon to go back to school. Additionally, Jacob and Sharon want to create a college fund of $30,000 to fund their childs 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
a.	Spouses education fund
b.	Childs college fund
c.	Other needs	$0
3.	Final expenses (funeral costs and estate taxes)
4.	Debt liquidation
a.	House mortgage
b.	Other loans
c.	Total debt (4a + 4b)
5.	Other financial needs	$0
	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 Kleins should purchase, they need to factor in additional information. True or False: Sharons annual Social Security benefit should be accounted for in the remaining portion of the form. True False